Sri Lankan rupee weaker; moral suasion caps fall

Oct 27, 2016 (Reuters) – The Sri Lankan rupee traded weaker on Thursday on importer demand for the U.S. currency with moral suasion by the central bank preventing a fall in both the spot currency and spot-next, dealers said.

Rupee forwards were active, with the one-week trading at 148.15/30 per dollar at 0538 GMT compared to the previous day’s close of 148.10/25.

Dealers said moral suasion prevented the spot-next trading below 147.70/148.10 forcing one-week forwards to trade actively. On Wednesday, the spot-next ended at 147.90/148.10.

The spot rupee was quoted at 146.90/95 per dollar, but there were hardly any trades.

“The dollar demand is there. The central bank’s moral suasion prevented the spot-next trading below 147.70 and it forced dealers to trade in one-week forwards,” 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 Oct. 19, data from the central bank showed.

Dealers said the market was waiting for some direction from the national budget due on Nov. 10.

Sri Lankan shares were steady, with the benchmark Colombo stock index 0.01 percent weaker at 6,434.14 as of 0540 GMT. Turnover stood at 32 million rupees ($217,170).