Thursday, 30 October 2014 01:13
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Reuters: The Sri Lankan rupee edged up on Wednesday due to foreign investor inflows into the stock market, recovering from early losses after moral suasion by the Central Bank prevented a further slide in the local currency, dealers said.
Dealers said the market expects the local currency to face more pressure due to rising imports and lower rates. The central bank’s stable exchange rate policy would encourage more imports in the medium term, they said.
The spot currency was quoted at 130.80/131.00 per dollar at close, compared to Tuesday’s level of 130.90/131.00. Dealers said the Central Bank prevented it from trading below 130.85.
The spot was largely untraded last week on moral suasion by the central bank.
Dealers said the three-day forwards or spot next was actively traded in the absence of spot. Spot next ended at 131.95/131.05 per dollar compared with Tuesday’s close of 131.00/131.05.
“There was inflow into stock market and that helped the rupee close higher,” a currency dealer said.
“Going forward, an appreciation is only possible through borrowing because budget proposals will boost consumer spending and thus create demand for the rupee.”
Sri Lanka’s central bank governor Ajith Nivard Cabraal said during a Reuters post-budget forum in Colombo on Monday that the trend was for an appreciating rupee. He did not elaborate.
The Central Bank had last week dissuaded some banks from trading in the spot and three-day currency forwards below a pre-determined level to prevent volatility.
