Rupee hits fresh low on importer dollar demand

Reuters: The rupee hit a new low of 156.10 per dollar on Wednesday as importer dollar demand outweighed mild selling of the greenback by exporters, dealers said.

The rupee touched an intraday low of 156.10 per dollar, surpassing the all-time low hit on 14 February, before closing at 156.05/15, compared with Wednesday’s close of 155.85/95.

“Demand pressure is there with seasonal imports,” said a currency dealer.

“Today there was import demand from state banks and also from foreign banks and the exporter (dollar) conversion was very thin.”

The rupee has weakened 1.66% 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, they added. The International Monetary Fund on Friday 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 7 March, Central Bank data showed.

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

Police said on Friday 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 Saturday in Kandy.