Friday, 21 February 2014 00:39
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Reuters: The Sri Lankan rupee ended at its lowest in more than two months on Thursday due to importer dollar demand, dealers said, breaching a key barrier that the central bank had been defending since early December.
The market expects slight depreciation in the local currency in the near future due to rising seasonal importer demand for dollars.
The rupee is usually under pressure in March and early April due to seasonal imports ahead of the traditional new year in mid-April.
The spot rupee ended at 130.95/131.00 per dollar, its lowest since Dec. 13, Reuters data showed, from Wednesday’s close of 130.85/90.
It breached the 130.85 level, which dealers said the central bank has been defending for the past two months through buying and selling of dollars via two state banks. On Thursday, the two state banks were not seen defending the rupee, dealers said.
The market and analysts had been concerned about the sustainability of the central bank’s policy measures to maintain a stable exchange rate, which is defended via selling and buying dollars, in a low-interest-rate regime.
Sri Lanka’s central bank on Monday kept policy rates steady at multi-year lows, with inflation expected to be contained throughout 2014 by “well-managed demand conditions and improved domestic supply”.
Currency dealers and traders said the central bank’s policies should work until the market sees a jump in private sector credit growth, which rose 7.5% year-on-year in December from 7.3% a month earlier.
The rupee has gained about 3.2% since it hit a record low of 135.20 on Aug. 28 last year. It lost 2.5% in 2013.
