Rupee firms as exporters, foreign banks sell dollar

(Colombo) REUTERS- The Sri Lankan rupee ended firmer yesterday as exporters and some foreign banks sold the dollar, surpassing importer demand for the US currency, traders said.

The rupee traded at 159.90 early in the session and closed at 159.45/65 per dollar, compared with Friday’s close of 159.90/160.05. It has declined 3.9 percent so far this year and hit a record low of 160.17 on June 20.

Chinese President Xi Jinping has offered Sri Lanka a fresh grant of two billion yuan (US $ 295 million), as Beijing looks to expand its influence in the tiny island country off India’s southern tip.

“There was (dollar) demand but foreign banks were on the selling side today. Maybe after the news of Chinese grant they are selling,” said a currency dealer asking not to be named.

Central Bank Governor Indrajit Coomaraswamy had said earlier that the rupee’s decline was driven mainly by factors outside of Sri Lanka and that emerging-market currencies were under pressure.

The Central Bank is concerned that dollar hoarding and market manipulation are exacerbating the rupee’s weakness and has the tools to correct any misalignment in the exchange rate, Coomaraswamy told Reuters. The International Monetary Fund said last month that Sri Lanka’s economy remained vulnerable to adverse shocks due to a sizeable public debt and large refinancing needs.

Foreign investors sold government securities worth a net Rs.1.98 billion in the week ended July 18, bringing the outflows so far this year to Rs.31.6 billion, the Central Bank data showed.