COLOMBO, March 6 The Sri Lankan rupee traded
slightly weaker in dull trade on Monday as importer dollar
demand surpassed greenback sales due to inflows from
remittances, dealers said.
Rupee forwards were active, with two-week forwards
trading at 151.85/95 per dollar at 0635 GMT, compared with
Friday's close of 151.80/90.
"Today is a very dull day. The import demand is there after
the weekend but we can see some (inward) remittances," said a
currency dealer on condition of anonymity.
"If we don't get to see steady inflows, the rupee will be
under pressure due to seasonal import demand and drought."
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 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,
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
exports. Both will increase the demand for the greenback and put
pressure on the rupee.
Finance Minister Ravi Karunanayake on Friday denied Moody's
report and said the worst drought to hit Sri Lanka in 40 years
may cost the government up to 40 billion rupees ($264.7
million), but it should not worsen the fiscal deficit.
Foreign investors bought a net 701 million rupees ($4.64
million) worth of government securities in the week ended March
1 recording its first net inflow for the year. But they have
sold a net 63.76 billion rupees 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 percent so far this year. It fell
3.9 percent last year, following a 10 percent drop in 2015.
Sri Lankan shares were up 0.03 percent at 6,103.40,
as of 0637 GMT. Turnover stood at 279.5 million rupees ($1.85
($1 = 151.0000 Sri Lankan rupees)
(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sherry