Rupee hits record low for 7th session; state banks sell dollar

(Colombo) REUTERS: The Sri Lankan rupee fell 0.9 percent yesterday to hit a record low for a seventh straight session due to dollar demand from importers and banks to facilitate foreign bond outflows, market sources said.

Sources said state banks, through which the Central Bank usually directs the market, sold dollars in early trade to prevent sharp falls.

The currency fell to an all-time low of 168.70 per dollar before closing at 168.65/169.00, compared with Wednesday’s close of 167.10/30. The previous record low was 167.20 per dollar hit on Wednesday.

Exporters expect the rupee to be under pressure due to continued importer dollar demand and less exporter dollar sales.

The rupee has weakened 4.5 percent so far this month after a 1.2 percent drop last month, and has declined 9.9 percent so far this year.

The Central Bank will intervene in the foreign exchange markets if the rupee moves for any reasons other than global trends, Nandalal Weerasinghe, the bank’s senior Deputy Governor, told Reuters on Sept. 7.

The Finance Ministry would not intervene in exchange rate management, Junior Finance Minister Eran Wickremaratne said last week, adding that the Central Bank would intervene as and when necessary to curb excess volatility in the exchange rate and also punish speculators.

The dollar index, which tracks the dollar against a basket of six major rivals, dipped 0.18 percent to 94.371. The dollar was 0.04 percent lower against the yen at 112.25, while the euro was 0.26 percent stronger against the greenback at US$1.1700.

An illiquid market for dollars, dollar buying by foreign banks to facilitate bond outflows and importer demand weighed on the currency, said the sources.
Since last week, currency dealers have been refusing to speak to the media, citing instructions from the central bank. However, Central Bank Governor Indrajit Coomaraswamy said that he was unaware of any such move. The rupee will be under pressure due to year-end seasonal dollar demand from importers, dealers have said earlier.The currency has also been hurt by weakness in the Indian rupee. India is Sri Lanka’s biggest trading partner and the Indian rupee, which hit a record low on Tuesday, is Asia’s worst performing currency this year. Indian markets were closed yesterday for a holiday.

Foreign investors sold government securities worth a net Rs.2.6 billion (US$15.42 million) in the week ended Sept. 12, extending the net outflow so far this year to Rs.55.9 billion worth of securities, Central Bank data showed.