COLOMBO, Feb 21 (Reuters) - The Sri Lankan rupee declined on Tuesday on dollar demand from foreign banks as offshore investors sold government securities amid concerns over further depreciation in the local currency, dealers said.
Dollar demand from importers also weighed on the unit, dealers said.
Rupee forwards were active with one-month forwards at 153.20/35 per dollar, weaker than Monday’s close of 152.95/153.15.
Two-week forwards were traded at 151.90/152.00 per dollar, weaker than Monday’s close of 151.70/75 per dollar.
“There is no supply (of dollars) in the market and there are lot of outflows with foreigners exiting from government rupee bonds,” 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 net sold 49.1 billion rupees ($325.70 million) worth of government securities in the seven weeks to Feb. 15, more than the total net foreign outflow of $324.3 million in 2016, according to the latest central bank and government 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 0.94 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 up 0.05 percent at 6,142.32 as of 0639 GMT. Turnover was 146.8 million rupees ($972,185).
$1 = 151.0000 Sri Lankan rupees Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu