REUTERS: The Sri Lankan rupee ended weaker yesterday led by usual importer dollar demand, but dealers said depreciation pressure on the currency has eased on strong inflows from foreign borrowings.
Rupee forwards were active, with spot-next forwards ending at 152.85/90 per dollar, compared with Tuesday’s close of 152.70/80.
One-week forwards ended at 152.95/153.00 per dollar, compared with Tuesday’s close of 152.90/153.00. “We see usual day-to-day importer dollar demand. The depreciation pressure has eased since the sovereign loan came in, but we do not see any intervention by the Central Bank,” a currency dealer said asking not to be named.
“The dollar supply is used by importers unless there is a huge import bill. The Central Bank intervenes by just directing the market through adjusting the spot reference rate. The market is now determining the exchange rate unlike in the past.” The spot rupee did not trade yesterday. The Central Bank fixed the spot rupee reference rate at 152.50 on May 5.
Central Bank Governor Indrajit Coomaraswamy said last week that the monetary authority did not want to allow the rupee to fall “too quickly”, but suggested further weakness in the exchange rate was on the cards as policymakers sought a competitive currency. The downward adjustment to the spot currency was to make the rupee more competitive, he added.
The Central Bank has allowed the currency to gradually depreciate since mid-December, revising its spot reference rate multiple times.
Sri Lanka regained a lucrative European Union trade concession with effect from Friday, but the market shrugged off the decision, with analysts saying they were waiting to see the real impact of the facility. Sri Lanka received US $ 1.5 billion last week from a 10-year sovereign bond, while another US $ 450 million from a syndicated loan is expected soon.