Rupee edges down on importer dollar demand

Reuters: The Sri Lankan rupee slipped yesterday (12 March) as importer dollar buying surpassed mild selling of the greenback by exporters, who were looking to gauge importer demand ahead of the traditional New Year next month.

The rupee closed at 155.50/70 per dollar, compared with 9 March’s close of 155.45/55. It hit a record low of 155.90 per dollar on 14 February.

“There was importer demand today and the exporters were staying away as they wanted to see where the (rupee) will be with the seasonal importer demand,” said a currency dealer.

The rupee has weakened 1.43% so far this year after declining 2.5% last year and 3.9% in 2016.

It is expected to be pressured by continued importer demand for dollars ahead of the traditional New Year in April, dealers said.

A gradual depreciation in the rupee and higher volatility this year are expected on account of debt repayments by the government, dealers added. The International Monetary Fund on 9 March said Sri Lanka’s economy remains vulnerable to adverse shocks due to its large public debt and low external buffers.

The government must repay an estimated Rs. 1.97 trillion ($12.68 billion) in 2018 - a record high - including $2.9 billion of foreign loans and a total of $5.36 billion in interest. Foreign investors sold government securities worth a net Rs. 3.2 billion in the week ended 28 February. Central Bank data showed.

Dealers also said the communal violence in the central district of Kandy weighed on sentiment.

Police said on 9 March they were investigating whether 10 suspected ringleaders of a wave of attacks on Muslims by Sinhalese Buddhists had outside funding or foreign help. After five days of violence, police said the situation has calmed down and the curfew lifted since 10 March in Kandy.