REUTERS:  The Sri Lankan rupee slipped yesterday as importer dollar demand surpassed the selling of the greenback by exporters and banks, and inward remittances, while communal violence in the central district of Kandy weighed on sentiment, dealers said. 

Police said on Thursday it had arrested the suspected leader and nine others suspects behind a wave of anti-Muslim attacks by Sinhalese Buddhist hardliners in the central highlands region this week. 

After five days of violence, police said the situation has calmed down, though they reimposed curfew on Friday night in Kandy. 

The rupee closed at 155.45/55 per dollar, compared with Thursday’s close of 155.35/45. It hit a record low of 155.90 per dollar on Feb. 14. 
“Today trading was dull but ended a tad weaker on importer (dollar) demand,” said a currency dealer. 

The rupee has weakened 1.3 percent so far this year, after declining 2.5 percent last year and 3.9 percent in 2016. 

It is expected to be pressured by continued importer demand for dollars ahead of the traditional New Year in April, dealers said. 

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

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

Foreign investors sold government securities worth a net Rs.3.2 billion in the week ended Feb. 28, central bank data showed.