Rupee hits all-time low on importer dollar demand

Reuters: The rupee touched a record low on Monday as importer dollar demand, foreign outflows and government securities weighed on the currency, dealers said.

The rupee touched an all-time low of 160.60 per dollar in early trade on Monday before closing at 160.50/70, compared with Friday’s close of 160.45/55, and has declined 4.6% so far this year.

Absence of dollar conversions by exporters and remittances also pushed the rupee down. 

Dealers said there were fears it could depreciate further, tracking weakness in emerging market currencies.

“It was a dull day though there were importer demand. We did not see much exporter conversions and remittances,” a currency dealer said.

Sri Lanka’s stock market has suffered a Rs. 840.7 million outflow in the last four sessions through Monday.

Dealers said exporters are holding on to dollars as they expect the local currency to decline further.

Most Asian currencies started the week on a high note after news of impending lower-level trade talks between the United States and China returned risk appetite to regional markets.

The Sri Lankan currency is also hit by the fall in the Indian rupee, as India is Sri Lanka’s biggest trading partner. The Indian rupee is the region’s worst performing currency this year and hit a record low on Thursday.

Central Bank Governor Indrajit Coomaraswamy told reporters after holding key monetary policy rates steady that several emerging-market currencies had declined more than the Lankan rupee, adding that “if we reduce rates, that would put further pressure on the exchange rate”.

Foreign investors sold government securities worth a net Rs. 818 million ($ 5.10 million) in the week ended 15 August, bringing the outflow so far this year to Rs. 3.99 billion, Central Bank data showed.