Sri Lankan rupee firmer on bank dollar sales; stocks edge up

Sept 01, 2016 (Reuters) – The Sri Lankan rupee traded firmer on Thursday as dollar sales by banks on behalf of foreign investors to buy government securities surpassed the importer dollar demand, dealers said.

The spot rupee was at 145.50/57 per dollar at 0455 GMT tad firmer from Wednesday’s close of 145.55/60, while one-week rupee forwards were at 145.73/80 with compared to Wednesday’s close of 145.75/80.

“There are (dollar) selling, foreigners are buying bonds,” a currency dealer said asking not to be named.

After leaving the key policy rates steady, central bank governor Indrajith Coomaraswamy said on Tuesday that the currency was not under upward pressure as capital inflows had not been of sufficient magnitude to exert such pressure.

Dealers said the rupee could appreciate if the central bank does not buy the U.S. dollar from the market since capital inflows into government securities have started, and also due to $1.5 billion sovereign bond inflows.

The central bank had absorbed a net $600 million from the market since the International Monetary Fund (IMF) approved a $1.5 billion, three-year loan in June, Coomaraswamy told reporters on Tuesday.

Dealers said the central bank was not seen intervening in the market to defend the currency. Central bank officials 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.

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

Net foreign inflows into government securities jumped 31.4 percent to 302.4 billion rupees ($2.08 billion) through Aug. 24, according to the latest central bank data, since the IMF loan approval.

Meanwhile, Sri Lankan shares edged up, with the benchmark Colombo stock index climbing 0.25 percent to 6,544.84 as of 0508 GMT. Turnover was at 139.4 million Sri Lankan rupees ($958,075.60).