Sri Lankan rupee weaker on importer dollar demand

Sept 27, 2016 (Reuters) – The Sri Lankan rupee traded weaker on Tuesday as seasonal demand for dollar from importers exceeded sales by exporters and banks, dealers said.

The spot rupee traded at 146.45/55 per dollar, compared with Monday’s close of 146.35/45.

The spot-next forwards were at 146.56/60 per dollar, edging down from Monday’s close of 146.38/48. One-week forwards were at 146.65/80, weaker from last close of 146.50/68.

“There is importer demand today and not much of exporter conversions or remittances to meet that demand,” a currency dealer said, asking not to be named.

Dealers said the market expects the rupee to be under downward pressure until December due to the seasonal importer dollar demand.

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

Sri Lanka’s central bank is expected to keep its key interest rates steady on Wednesday, after cutting three times since December to fend off pressure on the fragile rupee and curb accelerating credit growth that has pushed up inflation.

The central bank is under pressure from the International Monetary Fund (IMF) to continue to rebuild international reserves and maintain exchange rate flexibility to further develop the foreign exchange market.

Sri Lankan shares were nearly flat, with the benchmark Colombo stock index up 0.02 percent at 6,480.02 as of 0536 GMT. Turnover was at 288.1 million rupees ($1.97 million).