Rupee hits record low; exporters on sidelines

REUTERS: The Sri Lankan rupee hit a record low of 158 per dollar yesterday in thin trade after the Central Bank chief said the currency will depreciate gradually while exporters stayed away from the market expecting further weakness.

The rupee ended at 157.95/158.10 per dollar, compared with Friday’s close of 157.85/158.10. The rupee will depreciate gradually as dollar outflows surpass inflows, Central Bank Chief Indrajit Coomaraswamy said on Friday. “The market was dull. There was no unusual importer dollar demand, but exporters are staying away from the market,” a currency dealer said.

“We did not see any intervention either from the central bank or state banks today. I think importers got panicked since April 23 and over-bought dollars. So exporters had been waiting for the currency to bit the bottom.”

The currency has declined 0.22 percent so far this month after a 1.5 percent fall in April. It has slipped 2.9 percent for this year.

Coomaraswamy on Friday also said the Central Bank was “studying carefully” if there was extra pressure on the currency than was expected and also the behaviour of market participants.

The Central Bank said on April 26 it would intervene to support the rupee when necessary and that there was no reason for the rupee to be under pressure given the country’s record US $ 10 billion foreign currency reserves.

Dealers said they expect the rupee to gradually weaken and face higher volatility this year due to debt repayments by the government. But Central Bank Senior Deputy Governor Nandalal Weerasinghe on Thursday said 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.4.05 billion in the week ended May 9, bringing the outflow so far this year to Rs.9.8 billion, the Central Bank data showed.