Rupee gains on late exporter conversions

Thursday, 24 May 2018 00:00 - - {{hitsCtrl.values.hits}}

Colombo (Reuters): The Sri Lankan rupee ended marginally firmer yesterday (23 May) on late exporter dollar conversions, but traders expect the currency to be under pressure from a possible slump in the country's top agriculture export, tea, due to heavy rains.

The spot rupee ended at 157.90/158 per dollar, compared with Tuesday's close of 158.00/10.

"The trading was dull amid heavy rains across the country. We saw some late exporter conversions," a currency dealer said. Dealers said the rupee could come under pressure with low supply of dollars as tea exporters would stay away due to rains. Heavy monsoon rains have killed ten people, prompting authorities to warn against landslides and floods in low-lying areas after spill gates had to be opened across the Indian Ocean island.

The rupee hit a record low of 158.50 per dollar on May 16 after the central bank chief said on 11 May that the currency would depreciate gradually as dollar outflows surpass inflows.

The currency has declined 0.1% so far this month after a 1.5% fall in April. It has fallen 2.8% this year.

The pressure on the currency is unwarranted as the gross external reserves are at $9.1 billion and the real effective exchange rate indexes indicate that the currency is competitive, the Central Bank said last week. The Central Bank is "studying carefully" if there was extra pressure on the currency than what was expected, and also the behaviour of market participants, Central Bank Chief Indrajit Coomaraswamy had said on 11 May. Dealers said they expect the rupee to gradually weaken and face higher volatility this year due to debt repayments by the Government.

Senior central bank Deputy Governor Nandalal Weerasinghe had said earlier this month that debt repayments by the Government will not have an impact on the currency as they are managed with borrowed money externally.

Foreign investors sold government securities worth a net Rs. 5.97 billion ($37.86 million) in the week ended 16 May, bringing the outflow so far this year to Rs. 15.8 billion, Central Bank data showed.