COLOMBO, March 7 The Sri Lankan rupee ended
steady in thin trade on Tuesday as mild importer dollar demand
offset sales of the greenback by exporters while traders awaited
cues on foreign selling in bonds, dealers said.
Rupee forwards were active, with two-week forwards
ending at 151.85/95 per dollar, unchanged from Monday's close.
"There was no big demand. Everybody is on the watch. They
are waiting to see the direction, whether there'll be more bond
sales by foreigners," said a currency dealer on condition of
"I don't know if this is a calm before the storm."
The International Monetary Find, during the latter part of
the trading session, urged the central bank to allow flexible
exchange rates and stand ready to tighten monetary policy after
the island nation missed the net international reserves target
in it $1.5 billion loan programme.
Dealers said the rupee would be under pressure due to dollar
demand from importers ahead of the traditional Sinhala-Tamil New
Year in mid-April, and as foreign investors continue to sell
Ratings agency Moody's said in a report last week that lower
agricultural exports and higher imports to make up for the loss
in domestic production would weigh on the current account
deficit and foreign exchange reserves.
The government's handouts to farming families affected by
drought could make the fiscal deficit target a challenge, the
rating agency added.
Lower agricultural output due to the drought will force the
government to increase imports, dealers said. For further
imports, the government needs more U.S. currency while there
will be fewer dollars coming in from agriculture commodity
Finance Minister Ravi Karunanayake said on Friday the worst
drought to hit Sri Lanka in 40 years may cost the government up
to 40 billion rupees ($264.7 million), but should not worsen the
Foreign investors bought a net 701 million rupees ($4.64
million) worth of government securities in the week ended March
1, recording the first weekly net inflow for the year. They have
sold a net 63.76 billion rupees of such instruments so far this
Sri Lanka could face balance-of-payments pressure due to
foreign outflows from government securities, a government
document showed last month, even as the island nation was in the
process of raising up to $2.5 billion from foreign
The rupee has weakened 1.07 percent so far this year. It
fell 3.9 percent last year, following a 10 percent drop in 2015.
($1 = 151.0000 Sri Lankan rupees)
(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil