Rupee ends weaker on importer dollar demand

Reuters - The Sri Lankan rupee closed weaker on Wednesday due to dollar demand from importers, dealers said, as the local currency snapped two days of gains on dollar selling by foreign banks.

The rupee has been under pressure due to rising imports and net selling of government securities by foreign investors, and a central bank decision to adjust the spot rupee reference rate to a record low of 150.15 rupees to the dollar.

Rupee forwards were active on Wednesday, with two-week forwards ending at 150.75/80 per dollar, weaker from Tuesday’s close of 150.55/65. One-month forwards closed at 151.25/35, down from the previous day’s close of 151.00/10.

“The dollar demand is there. But there wasn’t much supply (of dollars),” said a currency dealer who declined to be identified.

Dealers said one-month forwards traded actively during the latter part of the trading day as the central bank did not allow two-week forwards to trade below 150.75.

The spot rupee was quoted around the central bank’s reference level of 150.15, dealers said.

Sri Lanka’s central bank said it would sell $225 million worth development bonds, with settlement scheduled on Jan. 23.

Dealers say the market is waiting for the outcome of the bond sale as they expect pressure on the rupee to ease if the central bank raises the targeted amount.

The rupee is also under pressure as foreign investors have net sold 16.1 billion rupees ($107.3 million) worth of government securities in the week to Jan. 11, according to the latest central bank data.