COLOMBO, Feb 20 (Reuters) - The Sri Lankan rupee traded weaker on Monday on dollar demand from importers and foreign banks as foreign investors sold government securities amid concerns of further depreciation in the rupee, dealers said.
Rupee forwards were active, with one-month forwards trading at 153.00/40 per dollar 0520 GMT, weaker from Friday’s close of 152.70/80.
Two-week forwards, which had been actively traded, did not trade on Monday, but was quoted at 152.00 per dollar. It ended at 151.80/152.00 per dollar on Friday.
“We see some foreign banks buying (dollars). There is also importer (dollar) demand as they are buying fearing further depreciation (in rupee),” said a currency dealer, requesting not to be named.
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.
Foreign investors have net sold 49.1 billion rupees ($325.70 million) worth of government securities in the seven weeks to Feb. 15, according to the latest central bank data.
Finance Minister Ravi Karunanayake said on Feb. 14 that protecting a fragile rupee was more important than controlling interest rates as the local currency tended not to rebound after depreciating.
Central Bank Governor Indrajit Coomaraswamy said early this month that the bank was not planning to abruptly stop supporting the rupee.
The rupee has weakened 0.8 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 down 0.2 percent at 6,149.18 as of 0535 GMT. Turnover was 460.5 million rupees ($3.05 million).
$1 = 150.7500 Sri Lankan rupees Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri