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Sri Lankan rupee edges down on unusual year-end dollar demand
December 29, 2016 / 8:12 AM / a year ago

Sri Lankan rupee edges down on unusual year-end dollar demand

COLOMBO, Dec 29 (Reuters) - The Sri Lankan rupee traded slightly weaker on Thursday due to unusual year-end importer dollar demand, while moral suasion by the central bank capped further losses in one-week rupee forwards, dealers said.

Dealers said the market was bracing for some depreciation in the rupee in January after the central bank said on Friday that depreciation of the currency was not necessarily negative for the economy.

Rupee forwards were active, with one-week forwards trading at 150.15/25 per dollar, down from Wednesday’s close of 150.10/25.

Spot-next forwards and the spot rupee were hardly traded, dealers said.

“We expect some kind of depreciation in the new year after the central bank’s statement last week,” a currency dealer said on condition of anonymity.

“The central bank does not want to trade one-week forwards below 150.15. But there is unusual importer demand. Usually we do not see this kind of importer demand in the year-end.”

Officials from the central bank were not immediately available for comment.

A government move to borrow $1 billion to finance some infrastructure projects is cause for some optimism, dealers said.

“If that money comes, we may see some easing of the downward pressure (on the rupee),” the dealer said.

Sri Lanka intends to raise up to $1 billion via foreign currency term financing facility to finance the import elements of development projects specified in the 2017 budget, the government said on Wednesday.

The central bank on Wednesday raised the spot reference rate by 30 cents to 149.80. It raised the reference rate by 40 cents each in the previous two weeks.

Sri Lankan shares were 0.15 percent firmer as of 0758 GMT, moving away from their lowest close since April 6 hit on Tuesday.

Turnover stood at 697.6 million rupees ($4.66 million).

$1 = 149.8000 Sri Lankan rupees Reporting by Shihar Aneez; Editing by Biju Dwarakanath

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