Rupee forwards end firmer on dollar inflows

Reuters - Sri Lankan rupee forwards ended slightly firmer on Thursday as dollar sales by banks surpassed demand from importers, but dealers said they expected the currency to depreciate in the months to come due to rising imports and slowing dollar inflows.

One-week rupee forwards, which act as a proxy for spot, finished at 144.30/35 per dollar, slightly firmer from Wednesday’s close of 144.35/40.

Rupee forwards have been active since 27 January  as there has been little trading in the spot currency, with banks reluctant to trade below the 144.00 level amid moral suasion by the Central Bank.

Central Bank officials were not immediately available for comment.

“Forwards were a tad firmer. But overall we see foreign outflow from government securities,” said a currency dealer asking not to be named.

The rupee is also under pressure due to a lack of inflows and picking up of importer demand ahead of the festive season in April, dealers said.

Sri Lanka needs to pay more than $5 billion in foreign loans including interest payments in 2016, while its reserves were only around $7.3 billion at the end of December, according to Central Bcank data.

Dealers said the Central Bank would not be able to hold the rupee at current levels without strong dollar inflows.

The Central Bank usually intervenes in times of high volatility though it floated the rupee on 4 September 2015.

Commercial banks parked Rs. 44.6 billion ($309.94 million) of surplus liquidity on Thursday, using the Central Bank’s deposit facility at 6 %, official data showed.