COLOMBO, June 5 (Reuters) - The Sri Lankan rupee was steady on Monday as importer dollar demand offset greenback sales by exporters, while investors assessed the extent of damage to the economy from the recent floods and landslides, dealers said.
The country’s main agricultural crops - tea and rubber - were hit by the worst torrential rains in 14 years.
Damage to agricultural exports would put pressure on the rupee, currency dealers said. Analysts said the hospitality and manufacturing sectors are likely to be the 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 Monday, with spot-next forwards trading at 152.85/95 per dollar at 0618 GMT, unchanged from Friday’s close.
“The (importer dollar) demand is there after the weekend and ahead of a holiday in the middle of the week. But we can see some exporter conversions too,” 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 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 said on May 18 that the bank would allow gradual depreciation of the currency.
The spot rupee did not trade on Monday.
The central bank fixed the spot rupee reference rate at 152.50 on May 5.
Foreign investors bought a net 740 million rupees ($4.86 million) worth of government securities in the week ended May 31. They have sold a net 41.33 billion rupees worth of securities so far this year.
Sri Lankan shares were down 0.13 percent at 6,680.02 as of 0621 GMT. Turnover stood at 152.3 million rupees ($998,034). ($1 = 152.6000 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)