Sri Lankan rupee down on importer dollar demand; forwards active

Sept 21, 2016 (Reuters) – The Sri Lankan rupee fell on Wednesday on importer dollar demand, while currency forwards were actively traded in the absence of the spot rupee trading, dealers said, a day after the central bank’s moral suasion capped the rupee’s fall.

Traders were unwilling to trade the spot rupee below 146.00 , the level desired by the central bank, on Tuesday, dealers said.

“The spot rupee has not been trading because of the fears of the central bank’s moral suasion, but forwards were actively traded,” a currency dealer said asking not to be named.

Officials from the central bank were not available for comment.

The actively traded rupee forwards, spot-next-next were at 146.68/78 at 0615 GMT, compared with the previous close of 146.25/35.

“This means the implied spot rate is 146.55/65,” the dealer said. “Foreign buying in government securities is keeping the currency bit stable. If not for that, the rupee will fall.”

The spot rupee is usually managed by the central bank and market participants use the forward market levels for guidance on the currency.

Dealers had expected seasonal importer demand to pick up from mid-October.

The central bank had largely not intervened to defend the rupee ever since a dual-tenure sovereign bond issue raised $1.5 billion in July.

Sri Lankan shares gained, with the benchmark Colombo stock index up 0.33 percent at 6,451.33 as of 0622 GMT. Turnover was at 976 million rupees ($6.68 million).