Rupee hits new low; recovers on exporter dollar sales

Reuters - The Sri Lankan rupee hit a record low for a third straight session on Wednesday after the central bank chief said on Friday that the currency would depreciate gradually as dollar outflows surpass inflows.

Dollar selling by exporters in late trade helped the spot rupee recover from the record low of 158.50 per dollar and closed at 158.00/30 per dollar, compared with Tuesday’s close of 158.10/30.

Dealers said the market switched to rupee forwards as buying dollars for spot rupee was “very difficult” amid worries that the central bank could take actions against possible market manipulations.

The one-month rupee forwards traded at as low as 159.70 per dollar in early trade, dealers said.

“We saw exporters coming to the market when the spot was traded at 158.50,” a currency dealer said.

The currency has declined 0.25%so far this month after a 1.5%fall in April. It has fallen 3%this year.

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 Coomarswamy had said on Friday..

The central bank said on April 26 it would intervene to support the rupee when necessary and 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.

Senior central bank Deputy Governor Nandalal Weerasinghe had said on Thursday 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 4.05 billion rupees ($25.63 million) in the week ended May 9, bringing the outflow so far this year to 9.8 billion rupees, central bank data showed.