June 22 (Reuters) – Sri Lankan rupee one-week forwards fell on Wednesday on importer dollar demand amid low liquidity for the U.S. currency after Moody’s revised down its outlook on the island nation’s sovereign rating, dealers said.
The local currency was also under pressure due to lack of exporter conversions, while moral suasion by the central bank prevented spot trade, they added.
Moody’s Investors Service on Monday changed the country’s outlook to negative from stable, citing further weakening in some fiscal metrics in an environment of subdued GDP growth, which could lead to renewed balance of payments pressure.
One-week dollar/rupee forwards, which have been acting as a proxy for the spot rupee in the absence of trade in three-day forwards, were trading at 147.90/148.00 per dollar on Wednesday, weaker than Tuesday’s close of 147.30/70.
“The pressure is there as there are not much of (dollar) conversions, very low (dollar) liquidity, people are not selling dollars with rising uncertainty,” said a currency dealer, asking not to be named.
Dealers said the market was perplexed by the central bank’s intervention in both spot rupee and forwards. Central bank officials were not available for comment.
The central bank reduced the spot rupee’s peg to 144.50 per dollar last week, from 144.75 in the previous session.
The spot rupee was not actively traded for a seventh straight session on Wednesday, dealers said. The spot closed at 144.85/95 per dollar on June 13.
The spot rupee was pegged down from 145.75 levels in early June after the local currency rose following increased dollar conversions by exporters and overseas funds.
For a fifth straight day, there was no active trading in three-day dollar/rupee forwards, known as spot next.
The forwards closed at 144.85/90 per dollar on June 15. Spot next, which has acted as proxy for the spot currency since January, indicates the exchange rate for the day following conventional spot settlement.
For Wednesday’s trade, the spot next settlement takes place five days ahead due to the intervening weekend.
Foreign investors net bought 6.67 billion rupees ($46.06 million) worth of government bonds in the week ended June 15, central bank data showed. Lack of large inflows from exporters and borrowings were weighing on the currency, dealers said.