COLOMBO Dec 21 The Sri Lankan rupee closed
weaker on Wednesday due to dollar demand from importers and
capital outflows from government securities, dealers said, as
the greenback hovered near 14-year peaks against a basket of
The U.S. currency has chalked up all its 4.5 percent gains
for the year since the Nov. 8 presidential election, as traders
have bet that President-elect Donald Trump's administration will
go on a growth-boosting tax cut and fiscal spending spree.
Rupee forwards were active, with one-week forwards
closing at 150.50/90 per dollar, compared with Tuesday's close
"There is not only importer dollar demand, but also some
foreign outflows. We do not see exporter conversions as we saw
early this month, and remittances are not up to expectations," a
currency dealer said on condition of anonymity.
Spot-next forwards were hardly traded, dealers said. They
were actively traded until Tuesday in the absence of trading in
the spot rupee.
"I think the authorities would hold the rupee around the 150
level until the end of the year. But the central bank will not
be able to hold it for long because it is buying dollars to
build up reserves in line with a commitment to the IMF," another
currency dealer said.
Other dealers said the central bank will have to let the
currency depreciate or raise key policy rates at a monetary
board meeting later this month.
Finance Minister Ravi Karunanayake told Reuters in an
interview on Tuesday that the currency would recover and be
steady next year with expected foreign inflows.
The central bank increased the spot reference rate by 40
cents to 149.10 last week.
The rupee usually rises in December ahead of Christmas and
New Year due to remittances from expatriates, but dealers said
the currency was expected to face pressure this time due to
higher dollar demand from importers following the Fed rate hike.
Analysts said they expect some capital outflows as an
immediate reaction to the Fed rate hike, and have expressed
concern that the government's foreign borrowing cost would rise
in the short term.
Foreign investors have net sold 52.3 billion rupees ($350.77
million) of government securities in the eight weeks ended Dec.
(Reporting by Shihar Aneez; Editing by Biju Dwarakanath)