Rupee forwards end weaker on importer dollar demand

Saturday, 13 February 2016 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Sri Lankan rupee forwards ended down on Friday on importer dollar demand, while dealers said they expected the currency to weaken further in the months to come due to rising imports and slowing dollar inflows.

One-week rupee forwards, which act as a proxy for spot, ended at 144.37/42 per dollar compared with Thursday’s close of 144.30/35.

Rupee forwards have been active since Jan. 27 as there has been little trading in the spot currency, with banks reluctant to trade below the 144.00 level amid moral suasion by the Central Bank.

Central Bank officials were not immediately available for comment.

“There was importer demand today. There were not much of dollar sales in the market,” said a currency dealer asking not to be named.

The rupee is under pressure due to a lack of inflows and picking up of importer demand ahead of the festive season in April, dealers said.

Sri Lanka needs to pay more than $5 billion in foreign loans including interest payments in 2016, while its reserves were only around $7.3 billion at the end of December, according to Central Bank data.

Dealers said the Central Bank would not be able to hold the rupee at current levels without strong dollar inflows.

The Central Bank usually intervenes in times of high volatility though it floated the rupee on Sept. 4.

Commercial banks parked 37.1 billion rupees ($257.7 million) of surplus liquidity on Friday, using the Central Bank’s deposit facility at 6%, official data showed.