One-week rupee forwards down on importer dollar demand

Sri Lankan one-week rupee forwards fell yesterday due to importer dollar demand a day after Moody’s revised down its outlook on the country’s sovereign rating, dealers said. 

The local currency was also under pressure due to lack of exporter sales, while moral suasion by the Central Bank prevented spot trade, they added. Moody’s Investors Service on Monday affirmed the government’s foreign currency issuer and senior unsecured sovereign ratings at B1 and changed the outlook to negative from stable, citing further weakening in some fiscal metrics in an environment of subdued GDP growth which could lead to renewed balance of payments pressure. 

One-week dollar/rupee forwards, which have been acting as a proxy for the spot rupee in the absence of trade in three-day forwards on Tuesday, were at 147.30/50 per dollar at 0557 GMT, weaker than Monday’s close of 146.75/147.10. “The (dollar) demand is there. More than that exporters are not selling dollars,” a currency dealer said, asking not to be named. 

Dealers said the market was perplexed by the Central Bank’s intervention in both spot rupee and forwards. Central Bank officials were not available for comment. The Central Bank reduced the spot rupee’s peg to 144.50 per dollar on Thursday, from 144.75 in the previous session.  The spot rupee was not actively traded for a sixth straight session yesterday, dealers said. On June 13, the spot closed at 144.85/95 per dollar. The spot rupee was pegged down from 145.75 levels in early June after the local currency rose following increased dollar conversions by exporters and overseas funds.  For a fourth straight day, there was no active trading in three-day dollar/rupee forwards, known as spot next, dealers said. 

The forwards closed at 144.85/90 per dollar on Wednesday. Spot next, which has acted as proxy for the spot currency since January, indicates the exchange rate for the day following conventional spot settlement. For yesterday’s trade, the spot next settlement takes place three days ahead.

Foreign investors net bought Rs.6.67 billion worth of government bonds in the week ended June 15, Central Bank data showed. Lack of large inflows from exporters, and borrowings were weighing on the currency, dealers said.