Rupee hits record low for 7th session; State banks sell dollars

Reuters: The rupee fell 0.9% on Thursday to hit a record low for a seventh straight session due to dollar demand from importers and banks to facilitate foreign bond outflows, market sources said.

Sources said State banks, through which the Central Bank usually directs the market, sold dollars in early trade to prevent sharp falls.

The currency fell to an all-time low of 168.70 per dollar before closing at 168.65/169.00, compared with Wednesday’s close of 167.10/30. The previous record low was 167.20 per dollar hit on Wednesday.

Exporters expect the rupee to be under pressure due to continued importer dollar demand and less exporter dollar sales.

The rupee has weakened 4.5% so far this month after a 1.2% drop last month, and has declined 9.9% so far this year. The Central Bank will intervene in the foreign exchange markets if the rupee moves for any reasons other than global trends, the Bank’s Senior Deputy Governor Nandalal Weerasinghe told Reuters on 7 September.

The Finance Ministry would not intervene in exchange rate management, Junior Finance Minister Eran Wickremeratne said last week, adding that the Central Bank would intervene as and when necessary to curb excess volatility in the exchange rate and also punish speculators.

The dollar index, which tracks the dollar against a basket of six major rivals, dipped 0.18% to 94.371. The dollar was 0.04% lower against the yen at 112.25, while the euro was 0.26% stronger against the greenback at $ 1.1700.

An illiquid market for dollars, dollar buying by foreign banks to facilitate bond outflows and importer demand weighed on the currency, said the sources.

Since last week, currency dealers have been refusing to speak to the media, citing instructions from the Central Bank. However, Central Bank Governor Indrajit Coomaraswamy said that he was unaware of any such move.

The rupee will be under pressure due to year-end seasonal dollar demand from importers, dealers have said earlier.

The currency has also been hurt by weakness in the Indian rupee. India is Sri Lanka’s biggest trading partner and the Indian rupee, which hit a record low on Tuesday, is Asia’s worst performing currency this year. Indian markets were closed on Thursday for a holiday.

Foreign investors sold government securities worth a net Rs. 2.6 billion ($ 15.42 million) in the week ended 12 September, extending the net outflow so far this year to Rs. 55.9 billion worth of securities, Central Bank data showed.