COLOMBO Feb 22 The Sri Lankan rupee fell on
Wednesday due to importer dollar demand as local traders bought
the U.S. currency on concerns about a steep depreciation in the
rupee in the absence of central bank intervention, dealers said.
Rupee forwards were active with two-week forwards
trading at 153.10/30 per dollar, weaker than Tuesday's close of
152.70/90. They have fallen 0.85 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 waiting to see the
bottom," said a currency dealer, requesting not to be named.
"There is some panic at the moment. We see a sharp
depreciation since Feb. 2 and it has created an unnecessary
panic. I don't see central bank doing anything to prevent the
The central bank's decision to not intervene in the market
was contrary the central bank governor Indrajit Coomaraswamy's
comment early this month. He said the bank was not planning to
abruptly stop supporting the rupee.
Another dealer said the rupee will fall further because of
seasonal importer demand until the traditional Sinhala-Tamil new
year in mid-April.
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 also 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, more than 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 1.1 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.
Sri Lankan shares were up 0.14 percent at 6,136.15 as
of 0706 GMT. Turnover was 317.7 million rupees ($2.10 million).
($1 = 151.1500 Sri Lankan rupees)
(Reporting by Shihar Aneez and Ranga Sirilal; Editing by Sunil