Sri Lankan rupee firms on dollar selling by foreign bank; stocks rise

July 13, 2016 (Reuters) – The Sri Lankan rupee rose on Wednesday as a foreign bank sold dollars on behalf of investors keen to buy local bonds after Finance Minister Ravi Karunanayake said the currency would rise on expected inflows from a sovereign bond issue, dealers said.

Sri Lanka raised $1.5 billion in its first sale of dual-tranche eurobonds on Monday, although at a lower borrowing cost than initially expected, as yield-hungry global investors put in over $5.5 billion in offers.

On Tuesday, Karunanayake said the rupee would “obviously appreciate” on inflows from the sovereign bond issue, and as other borrowings help increase the country’s foreign reserves to $8.3 billion from the current $6 billion.

“When we have the appreciative reserves, then the rupee has to appreciate on the other side,” Karunanayake told reporters after market hours.

Sri Lankan rupee one-week forwards, which have been acting as a proxy for the spot rupee, were trading at 146.20/40 per dollar at 0542 GMT, firmer than Tuesday’s close of 146.30/40.

The spot rupee was not quoted, but the spot-next, which are rupee forwards settled a day after the spot rupee settlement, were at 146.15/20 per dollar, firmer than Tuesday’s close of 146.20/30, dealers said.

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

“Rupee is firmer on mild dollar sales by a foreign bank on behalf of overseas investors to buy local bonds,” said a currency dealer, asking not to be named.

The central bank did not intervene in the foreign exchange market for the seventh straight session on Wednesday, they said.

Central bank officials were not available for comment.

The market is waiting to see if there could be any change in the currency level after inflows from the dollar bond issuance, dealers said.

The Sri Lankan stock index was up 0.27 percent at 6,418.35 as of 0601 GMT, on a turnover of 251.1 million rupees ($1.72 million).

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