Rupee hits record low; mild dollar sales ease pressure

(Colombo) REUTERS: The Sri Lankan rupee hit an all-time low of 161.30 per dollar yesterday, dragged down by importer dollar demand amid less inflows of the greenback, dealers said. The rupee, which hit a fresh record low of 161.30 early in the trade, closed at 161.20/30 per dollar, compared with Monday’s close of 161.05/20.

The local currency surpassed its earlier record of 161.20 hit in the previous session. The rupee declined 1 percent so far this month and 5.1 percent so far this year. “There was importer demand. We saw some dollar selling coming in after it traded at 161.30,” a dealer said, requesting anonymity. The local currency should stabilize in line with the regional currencies as the dollar index paused near one-month lows against major currencies to stand at 94.84 yesterday, dealers said.

The rupee will be under depreciation pressure with the year-end seasonal importer demand, dealers said.

Absence of dollar conversions by exporters and outflows from equities also pushed the rupee lower, said analysts.

Exporters are holding on to dollars as they expect the local currency to decline further, dealers said.

The Sri Lankan currency is also hurt by weakness in the Indian rupee. India is Sri Lanka’s biggest trading partner and the country’s currency, which hit a record low on August 16, is one of the worst performers in Asia this year.

Foreign investors sold government securities worth a net Rs.7.5 billion (US $46.8 million) in the week ended August 21, bringing the outflow so far this year to Rs.47.4 billion, the Central Bank data showed.