Sri Lankan rupee edges up on dollar sales by state bank

money

July 21, 2016 (Reuters) – The Sri Lankan rupee edged up on Thursday as dollar sales by a state bank outpaced the importer demand for the greenback, a day after a top central bank official said proceeds from a $1.5 billion sovereign bond issue, which dealers say would lift the local currency, have flowed in.

Dealers said the currency is under pressure again from importer dollar demand.

Central Bank Deputy Governor Nandalal Weerasinghe on Wednesday told Reuters that the $1.5 billion raised from the bond issue last week has already come into the country and absorbed into the foreign currency reserves.

Sri Lankan rupee one-week forwards, which have been acting as a proxy for the spot rupee, were at 146.60/90 per dollar at 0445 GMT, compared with Wednesday’s close of 147.00/20.

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

“The demand for dollars is there. We observed that a state bank started selling the greenback when the rupee traded at 147.40,” said a currency dealer asking not to be named.

“It looks like the sovereign bond proceeds are not going to help much. We have not seen it reflect in the central bank’s net holdings as yet.”

Last week, Finance Minister Ravi Karunanayake said the rupee would “obviously appreciate” on inflows from Sri Lanka’s first sale of dual-tranche eurobonds.

The spot rupee or the spot-next, which are rupee forwards settled three days after the spot rupee settlement, were not traded. Spot-next ended weaker at 146.90/147.10 per dollar on Wednesday compared with Monday’s close of 146.60/70.

The Sri Lankan stock index was up 0.16 percent at 6,424.94 as of 0508 GMT, on a turnover of 106.8 million rupees ($729,508.20).