Rupee edges down to near record low; CB intervenes

Reuters: The Sri Lankan rupee closed slightly weaker yesterday (9 May) with the Central Bank selling dollars at Rs. 157.70 to 157.80 per dollar to select banks to arrest further fall, dealers said.

The rupee closed at 157.80/95 per dollar, compared with Tuesday’s close of 157.60/80.

The currency hit an all-time low of 157.90 per dollar on May 2. It has declined 0.2% so far this month after a 1.5% fall in April.

“Today the Central Bank was not that aggressive. The demand for dollars was there,” a currency dealer said, asking not to be named. “The emerging markets currencies are also under pressure.”

Officials at the Central Bank of Sri Lanka were not immediately available for comments.

The euro slid to a new 2018 low yesterday as more investors bet on the dollar rising because of relatively higher interest rates, while concerns about the US exit from an international nuclear deal with Iran also supported the greenback.

The rupee will stabilise and the monetary authority will intervene to smooth high volatility as there is no reason for a weaker currency, Central Bank Senior Deputy Governor Nandalal Weerasinghe said last week.

The Central Bank said on 26 April 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 $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.

Foreign investors sold government securities worth a net Rs. 5.7 billion ($36.20 million) in the week ended 2 May, bringing the outflow so far this year to Rs. 5.8 billion, Central Bank data showed.