Rupee ends slightly lower on importer dollar demand

Friday, 18 December 2015 23:53 - - {{hitsCtrl.values.hits}}

Reuters: The Sri Lankan rupee edged down on Friday due to importer dollar demand, with dealers expecting the currency to weaken further in 2016 due to lower reserves and higher imports.

The rupee closed at 143.65/80 per dollar, 0.03% down from Thursday’s close of 143.60/80. It hit a record low of 143.80 on Tuesday.

“Given Sri Lanka’s high dependency on imports and lower foreign currency reserves that would limit the Central Bank’s intervention to defend the currency, the rupee will continue to weaken,” a currency dealer said, asking not to be named.

Finance Minister Ravi Karunanayake on Thursday told parliament that Sri Lanka’s reserves were at “a healthy” USD 6.1 billion. However, that figure is 26% lower than the reserves at the end of 2014.

Sri Lanka plans to extend a USD 1.5 billion currency swap with the Reserve Bank of India (RBI) by one year, Karunanayake said on Friday.

The rupee has fallen 8.7% so far this year. It has declined 6.2% since the Central Bank floated the local currency on 4 September.

The Central Bank sold dollars worth a net USD 1.1 billion in the three months to 30 November, latest data showed. Dealers say part of that money went into defending the rupee, but Central Bank officials said it was to facilitate oil imports and foreign outflows from government securities.

Commercial banks parked Rs. 69.6 billion (USD 484.85) of surplus liquidity on Friday using the central bank’s deposit facility at 6%, official data showed.