Sri Lankan rupee weaker on importer dollar demand; stocks down

Nov 22, 2016 (Reuters) – The Sri Lankan rupee was trading weaker on Tuesday due to dollar demand from importers on fears that the U.S. President-elect Donald Trump’s policies would spark higher rates and strengthen the dollar.

Foreign investors might pull out of emerging markets, including Sri Lanka, if the Fed raises interest rates next month, dealers said.

Rupee forwards were active, with spot-next forwards trading at 148.70/75 per dollar at 0554 GMT, compared with Monday’s close of 148.55/65.

“The pressure has built up again today, the (importer) demand is there,” said a currency dealer requesting anonymity.

The International Monetary Fund (IMF) released a second tranche of loans worth $162.6 million and said Sri Lanka’s macro-economic and financial conditions have begun to stabilise.

Pressure on the rupee is now expected to ease, with investors waiting to see what action the central bank will take after the IMF loan money flows in, dealers said.

The central bank on Friday revised the spot rupee reference rate to 147.95 per dollar from 147.75.

The spot rupee was hardly traded on Tuesday, but was quoted at 148.00/149.00.

The rupee has been under pressure as exporters were reluctant to sell dollars due to global concerns and uncertainties in the Sri Lankan market following the national budget, which has proposed a revision in corporate and withholding taxes.

The rupee is also under pressure as foreign investors exit government securities due to new taxes proposed in the budget, dealers said.

Foreign investors net sold government securities worth 37.12 billion rupees ($250.81 million) in the five weeks ended Nov 2016, data from the central bank showed.

Sri Lankan shares were marginally weaker, with the benchmark Colombo stock index down 0.18 percent at 6,264.57 as of 0603 GMT. Turnover was 322.8 million Sri Lankan rupees ($2.18 million).