Rupee ends firmer on inward remittances

Reuters: The Sri Lankan rupee ended slightly firmer in light trade yesterday, helped by inward remittances and a lack of demand for dollars from importers due to a holiday in New York.

The spot rupee ended firmer at 157.90/158.05 per dollar, compared with Friday’s (25 May) close of 158.15/25.

“There was not much activity. We saw some inward remittances. But more than that, the rupee strengthened with there being a New York holiday, and there were no importers,” a currency dealer said.

Dealers said the rupee will be under pressure as exporters are expected to stay on the sidelines, anticipating it to weaken further in line with other emerging market currencies.

A possible slump in the country’s top agriculture export, tea, due to heavy monsoon rains also weighed on sentiment.

Dealers expect lower dollar inflows from tea exports to weigh on the currency, apart from debt repayments by the Government, and to see the rupee falling between 4% and 5% this year.

However, Senior Central Bank Deputy Governor Nandalal Weerasinghe said earlier this month that debt repayments by the Government will not have an impact on the currency as they are managed with borrowed money externally.

The rupee hit an all-time low of 158.50 per dollar on 16 May. The currency has declined 0.2% so far this month after a 1.5% fall in April. It has fallen 2.9% so far this year.

The pressure on the currency is unwarranted as gross external reserves are at $9.1 billion, and the real effective exchange rate indexes indicate that the currency is competitive, the Central Bank said last week.

Foreign investors sold Government securities worth a net Rs. 5.97 billion ($37.81 million) in the week ended 16 May, bringing the outflow so far this year to Rs. 15.8 billion, Central Bank data showed.

Sri Lanka’s stock and currency markets will remain closed today as it is a Poya day, and normal trading will resume tomorrow.