Rupee edges down on importer dollar demand

COLOMBO (Reuters): The Sri Lankan rupee ended marginally weaker yesterday as demand for the U.S. dollar from foreign banks surpassed mild inward remittances, traders said.

The rupee ended at 159.75/85 per dollar, compared with Monday’s close of 159.70/80. It hit a record low of 160.17 on June 20 and has declined 4.1 percent so far this year. 

“Today, some foreign banks were on the buying side. There were not much of remittances today,” said a currency dealer, asking not to be named. “The currency is under pressure, like its regional peers, but the central bank would not like to see the rupee trading above 160.00 per dollar.” On Friday, the Central Bank left its key policy rates unchanged saying the decision backed its goals for stabilising inflation and fostering sustainable economic growth.

Central Bank Governor Indrajit Coomaraswamy told reporters that several emerging market currencies had depreciated over 4 percent, more than the rupee, adding “if we reduce rates that would put further pressure on the exchange rate.” Sri Lanka last week raised import duties on small hybrid cars by more than 50 percent to boost revenue and curb a sharp fall in the rupee. The finance ministry imposed a minimum duty of Rs.1.25 million on any hybrid car with an engine capacity of less than 1,000 cubic centimetres to discourage imports which have put pressure on the rupee.

Coomaraswamy had said earlier that the rupee’s decline was driven mainly by factors outside Sri Lanka. Foreign investors sold government securities worth a net Rs.259.7 million (US$1.63 million) in the week ended Aug. 1, bringing the outflow so far this year to Rs.36.5 billion, Central Bank data showed.