Oct 28, 2016 (Reuters) – The Sri Lankan rupee traded weaker on Thursday with the central bank raising the spot reference rate by 50 cents as higher importer dollar demand weighed on the currency, dealers said.
However, moral suasion by the central bank prevented a steeper fall, they added.
The central bank raised the spot reference rate to 147.40 per dollar from previous rate of 146.90.
Rupee forwards were active, with one-week forwards steady at 148.35/50 per dollar compared with previous day’s close of 148.40/50, due to month end inward remittances amid central bank’s moral suasion.
“Moral suasion kept the rupee forwards steady. Imports are higher and today we could see some inward remittances due to the month end,” a currency dealer said, asking not to be named.
The spot rupee is usually managed by the central bank, and market participants use the forward market levels for guidance on the currency.
Officials from the central bank were not available for comment.
Dealers said foreign selling in government securities also put pressure on the currency.
Foreign investors sold 8.79 billion rupees ($59.84 million) worth of government securities in the week ended October 19, data from the central bank showed.
Dealers said the market was waiting for some direction from the national budget due on November 10.
Dealers also said the market had shrugged off a long-awaited economic statement by Prime Minister Ranil Wickremesinge, who on Thursday said the government will introduce a lower tax regime and concessions on investments in its next budget to boost faltering investment.
Sri Lankan shares were weaker, with the benchmark Colombo stock index 0.21 percent weaker at 6,424.68 as of 0652 GMT. Turnover stood at 111.2 million rupees ($751,859.36).