Rupee hits record low as IMF discusses loan

Wednesday, 13 June 2012 00:40 - - {{hitsCtrl.values.hits}}

Reuters: The Sri Lankan rupee fell to a record low of 133.60 against the dollar on Tuesday on importer demand for the US currency as an IMF delegation went into a sixth day of discussions on the last tranche of a $2.6 billion loan.

“The highest trade was done at 133.60 to the dollar, though we saw only thin volume,” a currency dealer said. “We didn’t see intervention from the State banks or the Central Bank. Probably, their hands are tied due to the ongoing discussions with the IMF.”

Four dealers confirmed the rupee trading at 133.60, breaking the previous record of 133.00 reached on 25 April, Reuters data showed.

But the currency recovered later as a State bank sold dollars to prevent further depreciation, dealers said, and closed at 132.40/70 to the dollar compared with Monday’s close of 131.80/132.00, after a State bank sold dollars.

It fell 0.5 per cent on Tuesday, extending the depreciation to 1.6 per cent in the last two sessions.

The IMF review team held talks with top Central Bank and Government officials on how the $59 billion economy is performing.

The IMF, which has long pressed the Central Bank to allow flexibility in the rupee exchange rate, is expected to release the last tranche of the loan – about $ 420 million – if it is satisfied with that performance.

Central Bank Governor Ajith Nivard Cabraal said there was no one reason for the rupee’s fall. “I would say people are unnecessarily factoring in conditions, which are not supported by macroeconomic fundamentals,” he told Reuters. “This is going to hurt some of the people who still think they need to buy dollars at these prices.”

The Central Bank said on 31 May the rupee would recover to below 125 to the dollar.

The currency has depreciated 16.5 per cent since 21 November, when the Government allowed a three per cent devaluation.

Sri Lankan stocks, meanwhile edged down with the main index losing 0.1 per cent in thin trade to end three straight sessions of gains on concerns over economic worries including rupee volatility and high interest rates.

Turnover was Rs. 242.4 million ($ 1.84 million), well below the daily average of Rs. 954 million this year. Foreign investors were net buyers for Rs. 62 million worth of shares extending the net foreign inflow so far this year to Rs. 22.6 billion.