REUTERS: The Sri Lankan rupee traded slightly weaker yesterday as dollar demand from importers surpassed sales of the U.S. currency, after the Central Bank held the key policy rates steady as expected, dealers said.
The Central Bank kept its benchmark interest rates steady yesterday before the markets opened, saying the current monetary policy was appropriate as it expected the economy to recover in the second half
of the year.
The spot rupee, which has been trading for five straight sessions after being inactive for six weeks, was at 153.20/30 per dollar at 0502 GMT, compared with Thursday’s close of 153.15/25.
The spot rupee resumed trading on Monday for the first time since May 5 when the central bank had fixed its reference rate at 152.50.
“There is (dollar) demand today and there is no intervention or moral suasion,” said a currency dealer, requesting anonymity. Dealers said they expect seasonal demand for the dollar to pick up from August.
The rupee has been under pressure after the Central Bank said it would allow gradual depreciation of the currency and set a target of US$1.2 billion in direct market purchases of dollars to boost the island nation’s reserves this year, mainly to meet a target set by the International Monetary Fund for a three-year US$1.5 billion loan.
Analysts said the rupee’s weakening is a key concern in the future.
“If, as we expect, the Fed tightens monetary policy more aggressively than the market expects over the coming months, there is a risk that this could lead to further falls in the (rupee) currency against the U.S. dollar,” Krystal Tan, Asia economist at Capital Economics, said in a research note.