March 9, 2017 / 6:14 AM / 4 months ago

Sri Lankan rupee weaker on importer dollar demand

3 Min Read

COLOMBO, March 9 (Reuters) - The Sri Lankan rupee traded weaker on Thursday due to rising importer dollar demand and a lack of greenback sales by exporters, dealers said after the International Monetary Fund urged the country's central bank to rebuild foreign reserves while maintaining exchange rate flexibility.

Following its second review of a $1.5 billion three-year loan programme, the IMF said it had discussed with Sri Lankan authorities the need to push forward with reforms due to an uncertain external environment.

Rupee forwards were active, with two-week forwards trading at 152.40/60 per dollar, compared with Wednesday's close of 152.35/50.

"The demand (for dollars) has picked up again, There are no sellers (of dollars) in the market," said a currency dealer, asking not to be named.

Dealers expect the rupee to depreciate around 6-8 percent during this year.

Analysts said inflow from an up to $1.5 billion sovereign bond issue sooner than later could help ease some pressure on the currency.

Sources who know about the bond deal said top central bank officials have already left for the United States for a road show for the sovereign bond issue announced last month.

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 government securities.

S&P Global Ratings said in a statement on Tuesday that it considers exchange rate stability will remain a major priority for Sri Lanka's policymakers and its central bank, limiting monetary flexibility.

The central bank is struggling to maintain a flexible exchange rate in the face of heavy foreign outflows from government securities. The rupee has depreciated 1.2 percent so far this year, having lost 3.9 percent of its value against the dollar last year.

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 year.

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 borrowing.

Sri Lankan shares were down 0.17 percent at 6,085.00, as of 0548 GMT. Turnover stood at 387.3 million rupees ($2.56 million). ($1 = 151.2500 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)

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