COLOMBO Feb 22 The Sri Lankan rupee ended
weaker on Wednesday on importer dollar demand as local traders
bought the U.S. currency as a precaution amid concerns of a
steep depreciation in the rupee in the absence of central bank
intervention, dealers said.
Rupee forwards were active with two-week forwards
ending at 153.40/70 per dollar, after hitting a low of 153.65
during the day, weaker than Tuesday's close of 152.70/90.
They have fallen 1.04 percent so far this week.
"Importers are trying to buy dollars as they expect a sharp
fall in the currency due to a lack of central bank intervention.
Exporters are not selling dollars and are waiting to see the
bottom," said a currency dealer, requesting not to be named.
"There is some panic at the moment. We have seen a sharp
depreciation since Feb. 2 and it has created panic. I don't see
central bank doing anything to prevent the sharp fall."
The apex bank's decision to not intervene in the market was
in contrast to its governor Indrajit Coomaraswamy's comment
early this month. He said the bank was not planning to abruptly
stop supporting the rupee.
The rupee will fall further because of seasonal importer
demand until the traditional Sinhala-Tamil new year in
mid-April, another dealer said.
The currency fall comes even as a mission from the
International Monetary Fund (IMF), which has asked the central
bank to maintain a flexible exchange rate, is in Colombo for the
second review of a $1.5 billion loan.
The currency is under pressure due to foreign outflows from
government securities. Foreign investors have net sold $325.70
million worth of securities in the seven weeks to Feb. 15,
surpassing the total net foreign outflow of $324.3 million in
2016, according to the latest central bank and government data.
Sri Lanka could face balance-of-payments pressure due to
foreign outflows from government securities, a government
document showed on Thursday, even as the island-nation is in the
process of raising up to $2.5 billion from foreign borrowing.
Finance Minister Ravi Karunanayake said last week that
protecting a fragile rupee was more important than controlling
interest rates as the local currency tended not to rebound after
The rupee has weakened 1.3 percent so far this year, under
pressure from rising imports and net selling of government
securities by foreign investors. It fell 3.9 percent last year,
following a 10 percent drop in 2015.
($1 = 151.1500 Sri Lankan rupees)
(Reporting by Shihar Aneez and Ranga Sirilal; Editing by Vyas