Rupee forwards end slightly weaker on importer dollar demand

REUTERS: Sri Lankan rupee forwards ended slightly weaker yesterday as importer dollar demand outpaced greenback conversions by exporters and banks, while the spot currency was actively traded for the first time in nearly five months, dealers said.

The dollar/rupee forwards, known as spot next, ended at 145.95/146.05 per dollar, compared with Tuesday’s close of 145.75/85. The spot next, which acted as a proxy for the spot currency, indicates the exchange rate for the day following conventional spot settlement, which is five days ahead for yesterday’s trade. Dealers said the spot currency, which had not traded since January 18, started trading yesterday and touched a high of 145.67 per dollar.

The spot rupee ended at 145.75/146.05 per dollar. It was last actively traded at 144.00 per dollar on January 18, dealers said. “The spot was not allowed to trade above 145.75. So, the market switched to forwards. Rupee (forwards) ended weaker due late importer (dollar) demand,” a currency dealer said. Sri Lanka’s Central Bank had fixed the spot rate at 143.90 per dollar until May 2, and the spot rupee reference rate has been pegged at 145.75.

Two state-run banks, through which the Central Bank usually directs the market, sometimes sell dollars to curb falls in the rupee. The Central Bank officials were not available for comment on whether it had intervened. Dealers, however, expect the local currency to strengthen further, after the International Monetary Fund’s (IMF) executive board approved a three-year US $ 1.5 billion loan to support the country’s economic reform agenda. They said the slowdown in exports and continued exporter dollar conversions would help boost the currency.