Rupee edges up on late exporter conversions

REUTERS: The Sri Lankan rupee ended marginally firmer yesterday on late exporter dollar conversions, but traders expect the currency to be under pressure from a possible slump in the country’s top agriculture export, tea, due to heavy rains.

The spot rupee ended at 157.90/158 per dollar, compared with Tuesday’s close of 158.00/10.
“The trading was dull amid heavy rains across the country. We saw some late exporter conversions,” a currency dealer said.

Dealers said the rupee could come under pressure with low supply of dollars as tea exporters would stay away due to rains.

Heavy monsoon rains have killed 10 people, prompting authorities to warn against landslides and floods in low-lying areas after spill gates had to be opened across the Indian Ocean island.

The rupee hit a record low of 158.50 per dollar on May 16 after the Central Bank chief said on May 11 that the currency would depreciate gradually as dollar outflows surpass inflows.

The currency has declined 0.1 percent so far this month after a 1.5 percent fall in April. It has fallen 2.8 percent this year.

The pressure on the currency is unwarranted as the gross external reserves are at US $ 9.1 billion and the real effective exchange rate indexes indicate that the currency is competitive, the Central Bank said last week.

The Central Bank is “studying carefully” if there was extra pressure on the currency than what was expected and also the behaviour of market participants, Central Bank Chief Indrajit Coomaraswamy had said on May 11.

Dealers said they expect the rupee to gradually weaken and face higher volatility this year due to debt repayments by the government.

Central Bank Senior Deputy Governor Nandalal Weerasinghe had said earlier this month that debt repayments by the government will not have an impact on the currency as they are managed with borrowed money externally.

Foreign investors sold government securities worth a net Rs.5.97 billion in the week ended May 16, bringing the outflow so far this year to Rs.15.8 billion, the Central Bank data showed.