COLOMBO, May 22 (Reuters) - The Sri Lankan rupee weakened on Monday on dollar demand from importers and was seen easing further after the central bank said it would buy dollars directly from the market to boost reserves.
The central bank is targeting $1.2 billion in direct market purchases of dollars to boost the island nation’s reserves this year, Indrajit Coomaraswamy, the monetary authority’s chief, said on Thursday.
Dealers said dollar selling by state banks prevented a steeper decline, but it was not clear whether the state banks sold dollars on behalf the central bank.
Central bank officials were not immediately available for comment.
Rupee forwards were active, with spot-next forwards trading at 152.95/153.00 per dollar, compared with Friday’s close of 152.90/153.00.
Two-week forwards traded at 153.35/45, compared with the previous session’s close of 153.30/40.
The spot rupee did not trade on Monday.
The central bank fixed the spot rupee reference rate at 152.50 on May 5.
A currency dealer said the market was awaiting policies from the new finance minister, Mangala Samaraweera, after President Maithripala Sirisena switched the finance and foreign ministers in a cabinet reshuffle on Monday in a bid to restore confidence in the administration’s handling of the economy.
“Everybody is awaiting for the direction from the new finance minister. We don’t know whether he will push through the reforms of the former minister or he will have his own,” the dealer said.
The new appointment came after Sri Lanka missed its December-end reserves target agreed with the International Monetary Fund (IMF) for a $1.5 billion, 36-month loan.
Coomaraswamy said the central bank has purchased around $400 million directly from the market so far this year.
The central bank has allowed the currency to gradually depreciate since mid-December, revising its spot reference rate multiple times.
Sri Lankan shares were down 0.2 percent at 6,718.41 as of 0636 GMT. Turnover stood at 238.2 million Sri Lankan rupees ($1.56 million). ($1 = 152.8000 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)