COLOMBO Dec 15 The Sri Lankan rupee edged lower
on Thursday as the central bank raised the spot reference rate
further, a day after the U.S. Federal Reserve hiked interest
rates by 25 basis points, dealers said.
The Fed raised interest rates on Wednesday and signalled a
faster pace of increases in 2017 as central bankers adapted to
the incoming Donald Trump administration's promises of tax cuts,
spending and deregulation.
Asian shares and currencies struggled on Thursday after the
rate hike for the first time in a year as it hinted at the risk
of a faster pace of tightening than investors were positioned
Rupee forwards were active, with spot-next forwards
traded at 149.20/40 per dollar, compared with Wednesday's close
"The central bank increased the spot reference rate by 30
cents to 149.10, probably after the Fed rate hike," currency
dealer said, asking not to be named.
The move comes a day after the central bank raised the spot
reference rate by 10 cents.
The spot rupee was hardly traded, but was quoted at
The rupee usually rises in December ahead of Christmas and
the New Year due to remittances from expatriates, but dealers
said the currency was expected to face pressure due to higher
dollar demand from importers following the Fed rate hike.
"The immediate reaction will be capital outflow," said
Danushka Samarasinghe, head of research at Softlogic
"The Fed rate hike will also raise the government's foreign
borrowing cost in the short term. This will compel the
government to borrow more locally and the move could raise
market interest rates. If that happens, there could be outward
movement of money from equity market as well."
Foreign investors have net sold 45.4 billion rupees ($305.6
million) worth of government securities in the seven weeks ended
The rupee is expected to be under pressure on fears that
U.S. President-elect Donald Trump's economic policies will lead
to a stronger greenback and trigger foreign fund outflows, some
Sri Lankan shares were down 0.16 percent at 6,288.77
as of 0601 GMT. Turnover stood at 141.1 million Sri Lankan
($1 = 148.1000 Sri Lankan rupees)
(Reporting by Shihar Aneez; Editing by Vyas Mohan)