April 16, 2018 / 12:05 PM / 9 days ago

Sri Lankan rupee falls on importer dollar demand

COLOMBO, April 16 (Reuters) - The Sri Lankan rupee fell in light trade on Monday on importer dollar demand, while selling of the U.S. currency by exporters was also lower due to extended holidays at some firms after the traditional new year festival over the weekend, dealers said.

The rupee closed 0.2 percent weaker at 156.05/15 per dollar, compared with Thursday’s close of 155.70/80. The markets were closed on Friday for a holiday.

The central bank governor said earlier this month that if inflation rate can be maintained between 4 percent and 5 percent, the depreciation in the rupee would be around 2 percent -3 percent.

Dealers expect no impacts from the $2.5 billion inflow expected later this week in two tranches of sovereign bonds, the country’s largest offering in history.

Dealers said the market was also awaiting some political stability after President Maithripala Sirisena suspended the parliament until May 8.

The central bank has purchased over $400 million from the domestic foreign exchange market for this year through April 4 to build up international reserves.

Dealers expect pressure on the currency to rise until exporters return to the market after the extended leave.

The currency hit a record low of 156.20 per dollar on March 16. The rupee has weakened 1.7 percent so far this year after declining 2.5 percent last year and 3.9 percent in 2016.

A gradual depreciation in the rupee and higher volatility are expected this year on account of debt repayments by the government, according to dealers.

The International Monetary Fund said in March that Sri Lanka’s economy remained vulnerable to adverse shocks due to its large public debt and low external buffers.

The government must repay an estimated 1.97 trillion rupees ($12.68 billion) in 2018 - a record - including $2.9 billion of foreign loans and a total of $5.36 billion in interest.

Foreign investors had sold government securities worth a net 2.4 billion rupees ($15.40 million) so far this year through April 11, central bank data showed. ($1 = 155.8500 Sri Lankan rupees) (Reporting by Shihar Aneez; Editing by Subhranshu Sahu)

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