Wednesday, 25 June 2014 00:00
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Reuters: The rupee ended at a three-week low on Tuesday on importer dollar demand, while dealers voiced concerns about possible US sanctions after the country imported Iranian crude via third parties.
Dealers said the rupee would be under pressure if the United States takes any action against Sri Lanka for importing Iranian crude via third parties.
The rupee ended at 130.32/35 per dollar, its lowest since 3 June and weaker from Monday’s close of 130.25/30.
Currency dealers said it was too early to speculate about any implications over the country breaching US sanctions.
“In the event Sri Lanka had breached the sanctions, we don’t know how the US would react. It could be an economic sanction or sanctions on specific institutions,” a currency dealer said on condition of anonymity.
The Government Spokesman said on Thursday the country had been buying Iranian crude from various countries via third parties, with the understanding of the United States.
The US has denied it had any agreement with Sri Lanka to allow Colombo to import Iranian crude via third parties.
State Department Deputy Spokeswoman Marie Harf on Friday said in the event of Sri Lanka breaching the sanctions, the US would have to consider a response consistent with its legal obligations and “any violations would immediately make the company or institution vulnerable to sanctions”.
Sri Lanka’s oil import bill could rise if it has to buy more refined oil, dealers said. However, the Foreign Ministry has rejected the Government Spokesman’s claim.
Dealers expect the currency to be stable, if there is no pressure from the oil import bills, due to rising exports and a fall in imports and private sector credit growth.
On Monday, national carrier SriLankan Airlines priced a $ 175 million five-year, Government-guaranteed bond, for a yield of 5.3%.
Dealers said the bond proceeds could help boost reserves and give the Central Bank more room to intervene in the long run.
The rupee has appreciated 0.4% during the year up to 19 June, the Central Bank said in a statement on Friday, while the Central Bank had absorbed around $ 550 million from the domestic foreign exchange market this year through 17 June.
