Rupee falls on importer dollar demand

Tuesday, 20 February 2018 00:00 - - {{hitsCtrl.values.hits}}

Reuters: The Sri Lankan rupee edged down yesterday on importer dollar demand, while political uncertainty continued to weigh on investor sentiment, dealers said.

The rupee ended at 155.40/50 per dollar, compared with Friday’s close of 155.10/20. The rupee hit a record low of 155.90 on 14 February.

“Exporters were reluctant to sell (dollar) due to political uncertainty,” a dealer said, asking not to be named.

Prime Minister Ranil Wickremesinghe’s centre-right United National Party (UNP) and President Maithripala Sirisena’s centre-left Sri Lanka Freedom Party (SLFP) were routed by a party backed by former President Mahinda Rajapaksa in local polls on 10 February, plunging the Government into crisis.

Since the results, both parties have locked horns on how best to continue in the Government. Sirisena’s party wants to form its own Government, his party ministers have said, while Wickremesinghe’s party has said it is in the process of forming its own Government.

Wickremesinghe, addressing the media on 16 February, said that the Government will continue with a reshuffle of the cabinet.

The local currency has weakened 1.3% so far this year. The domestic currency lost 2.5% last year and 3.9% in 2016.

The currency is expected to be pressured by continued demand for dollars from importers, dealers said.

Dealers also said they expect a gradual depreciation in the rupee and higher volatility this year on account of debt repayments by the government. Sirisena’s administration 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 net worth Rs. 2.1 billion in the week ended 14 February, Central Bank data showed.

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