Nov 01, 2016 (Reuters) – The Sri Lankan rupee ended weaker on Tuesday due to dollar demand from importers, dealers said, a day after the country’s central bank kept key policy rates steady.
Despite the rupee being under downward pressure, the central bank kept its benchmark interest rates on hold late on Monday, as expected, saying its monetary policy stance remained appropriate as credit growth slowed.
Rupee forwards were active, with one-week forwards ending weaker at 148.60/70 per dollar, compared with Monday’s close of 148.35/40.
“The importer demand is building up. In addition to the seasonal importer demand, the bond outflows have also put pressure on the currency,” a currency dealer said, asking not to be named.
The central bank on Friday raised the spot reference rate by 50 cents to 147.40 per dollar from 146.90 as higher importer dollar demand weighed on the currency, while moral suasion by the central bank prevented a steeper fall in the rupee.
Officials from the central bank were not available for comment.
The spot rupee is usually managed by the central bank, and market participants use the forward market levels for guidance on the currency.
Dealers said selling of government securities by foreign investors also put pressure on the currency.
Foreign investors have sold a net 16 billion rupees ($108.40 million) worth of government securities in the two weeks to Oct. 26, data from the central bank showed.
The market was waiting for direction from the national budget, which is due on Nov. 10, dealers said.
The market also shrugged off a long-awaited economic statement by Prime Minister Ranil Wickremesinghe, dealers said.
Wickremesinghe said last week the government would introduce a lower tax regime and concessions on investment in its next budget to boost faltering investment.