COLOMBO, June 2 (Reuters) - Sri Lankan rupee traded slightly weaker on Friday as importer dollar demand outpaced the greenback selling by exporters, while investors weighed consequences of weather-related damage to the economy, dealers said.
The extent of the damage due to floods and landslides is yet to be assessed, with Sri Lanka’s main agricultural exports - tea and rubber - hit by the worst torrential rains in 14 years due to the cyclone “Mora” formed in the Bay of Bengal.
Damage to agricultural exports would put pressure on the rupee, currency dealers said. Analysts said hospitality and manufacturing sectors are likely to be worst hit.
However, dealers said there was some optimism over expected inflows in the form of international assistance, which could help offset potential downward pressure on the local currency.
Rupee forwards were active on Friday, with spot-next forwards trading at 152.85/95 per dollar at 0557 GMT, compared with Thursday’s close of 152.80/90 per dollar.
“The importer dollar demand is there today. We have seen a state bank buying dollars probably to pay oil bills,” said a currency dealer.
Dealers said the aid inflows could help the rupee, but the central bank will have to tighten interest rates to curb unnecessary credit growth and inflationary pressure.
The floods could hurt the overall economic growth and also widen the government’s budget deficit with high infrastructure spending, dealers said.
The rupee has been under pressure after the central bank governor on May 18 said the bank would allow gradual depreciation of the currency.
The spot rupee did not trade on Thursday.
The central bank fixed the spot rupee reference rate at 152.50 on May 5.
Sri Lankan shares were down 0.15 percent at 6,683.53 as of 0612 GMT. Turnover stood at 149 million rupees ($977,049.2).
$1 = 152.5000 Sri Lankan rupees Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sherry Jacob-Phillips