Thursday, 22 August 2013 00:00
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Reuters: The Sri Lankan rupee hit an 11-1/2-month low against the dollar on Wednesday due to importer demand for the greenback.
The market expects the local currency to depreciate further with foreign investors exiting treasury bonds and exporters holding onto dollars.
Currency dealers said banks switched to one-day currency forwards in an inactive spot market.
The spot rupee fell to 132.20 per dollar, its lowest since Sept. 14, Thomson Reuters data showed. It ended at 131.80/132.00 compared with Monday’s close of 131.85/132.00.
Markets were closed on Tuesday for a Buddhist religious holiday.
The spot next or one-day forward closed at 132.05/15 per dollar, falling from Monday’s close of 132.00/15.
“There is a heavy depreciation pressure because foreigners are gradually pulling out of T-bonds in small quantities. Exporters are also not converting dollars as they think the rupee has not hit the bottom,” a dealer said. The rupee fell around 4% between June 7 and July 18, after foreign investors started pulling out of Sri Lanka’s treasury bonds due to a rise in U.S. treasury yields on expectations of a winding down of monetary stimulus by the Federal Reserve. The benchmark 10-year note yield is hovering around a two-year high at 2.83%.
The central bank said on Monday it would intervene when there was excess volatility in the market.
