Rupee firms on exporter dollar conversions, remittances

7 April 2018 12:27 am - 0     - {{hitsCtrl.values.hits}}

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REUTERS: The Sri Lankan rupee ended stronger yesterday on exporter dollar conversions, inward remittances and foreign buying of government securities, as Prime Minister Ranil Wickremesinghe surviving a no-confidence motion earlier this week boosted sentiment, dealers said. 


Wickremesinghe won a no-confidence vote in parliament late on Wednesday as a majority of legislators voted to support his coalition government. 


Sri Lanka’s Central Bank unexpectedly cut its key lending rate by 25 basis points on Wednesday, as policy makers sought to revitalise an economy growing at its weakest pace in 16 years. 


The rupee, which traded at 155.65 per dollar earlier in the session, closed 0.2 percent firmer at 155.35/45 per dollar, compared with Thursday’s close of 155.50/60. 
The rupee gained 0.1 percent during the week. 


“There was importer (dollar) demand in the morning, but there were inflows today... inward remittances, exporter dollar conversions to pay salaries ahead of festival and some inflows to government securities too,” said a currency dealer. 

The Central Bank Governor, after the policy rate announcement on Wednesday, said if the inflation rate can be maintained between 4-5 percent, the depreciation in the rupee would be around 2-3 percent. 


Dealers expect pressure on the currency to ease with more inward remittances ahead of the traditional New Year on April 14. 


The currency has recovered and risen 0.5 percent since it hit a record low of 156.20 per dollar on March 16. The rupee has weakened 1.3 percent so far this year after declining 2.5 percent last year and 3.9 percent in 2016. 


A gradual depreciation in the rupee and higher volatility are expected this year on account of debt repayments by the government, dealers have said. 


The International Monetary Fund in March said that Sri Lanka’s economy remained vulnerable to adverse shocks due to its large public debt and low external buffers. 
The government must repay an estimated Rs.1.97 trillion (US$12.68 billion) in 2018 - a record - including US$2.9 billion of foreign loans and a total of US$5.36 billion in interest. 


Foreign investors sold government securities worth a net Rs.6.3 billion (US$40.5 million) so far this year through April 4, Central Bank data showed. 

 

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