Sri Lankan rupee forwards trade weaker on importer dollar demand

Sri Lanka-Markets-Analysts

May 26 (Reuters) – Sri Lankan rupee forwards fell on Thursday due to importer dollar demand and amid apprehension the currency would weaken on a possible increase in government spending after the country’s worst natural disaster since 2004, dealers said.

The cost of landslides and floods after days of torrential rains will be between $1.5 billion and $2 billion at the minimum, the government said earlier this week, as the Indian Ocean island struggles to recover from a cyclonic storm.

The dollar/rupee forwards, known as spot next, was at 147.25/30 per dollar, compared with Wednesday’s close of 147.05/30.

The spot next, which acts as a proxy for the spot currency, indicates the exchange rate for the day following the conventional spot settlement, which is five days ahead for Thursday’s trade.

“There is importer demand. But dealers are reluctant to trade (forwards) below 147.05 fearing repercussions from the central bank, and we have seen central bank offering to some select trades at 145.75,” a currency dealer said, asking not to be named.

Central bank officials were not available for comment.

Finance Minister Ravi Karunanayake told a Foreign Correspondents’ Association forum on Wednesday that the government was in the process of borrowing up to $3.5 billion from foreign sources via syndicated loans, sovereign bonds, and sukuk.

The spot currency did not trade on Thursday.

The spot rupee reference rate has been pegged at 145.75, dealers said. Sri Lanka‘s central bank had fixed the spot rate at 143.90 per dollar until May 2.