Rupee forwards firm up on dollar selling by state bank

REUTERS: Sri Lankan rupee forwards rose yesterday as a state-owned bank sold dollars to select trades amid importer demand for the U.S. currency, dealers said.

Dollar/rupee forwards, known as spot next, were at 147.35/45 per dollar at 0531 GMT compared with Thursday’s close of 147.75/90.

Spot next, which acts 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.

“The demand is there, but a state bank is selling (dollars) at 147.35 to select trades and there are no other sellers in the market,” a currency dealer said.

Two state-run banks, through which the Central Bank usually directs the market, sometimes sell dollars to curb falls in the rupee.

Central Bank officials were not available to comment on whether the selling was prompted by the monetary authority.

There was little impact on the rupee from Finance Minister Ravi Karunanayake’s announcement on Tuesday that Japan would lend US $ 4.2 billion to Sri Lanka through a loan and bond financing, in the next two years.

The spot currency was not traded yesterday.
The spot rupee reference rate has been pegged at 145.75, dealers said. Sri Lanka’s Central Bank had fixed the spot rate at 143.90 per dollar until May 2.

Dealers said the rupee would continue to face pressure despite foreign inflows into government securities and expectations of further inflows, unless the inflows are large enough to boost reserves.
Foreign investors were net buyers of Rs.7.23 billion in the week ended May 25, Central Bank data showed.

The government is in the process of borrowing up to US $ 3.5 billion from foreign sources via syndicated loans, sovereign bonds, and Islamic bonds, Karunanayake said last week.
The Sri Lankan stock index was 0.07 percent weaker at 6,519.41 as of 0534 GMT on a turnover of Rs.158.2 million.