(Colombo) REUTERS: The Sri Lankan rupee hit a fresh low of 169.05 yesterday on importer dollar demand, while intervention by the Central Bank limited the fall, market sources said.
Sri Lanka’s finance minister urged its people to buy local products and shun unnecessary imports in order to reduce the trade deficit and help stabilise a weak rupee, a day after Prime Minister Ranil Wickremesinghe said the government would take measures to impose taxes to curb imports by up to US $ 1 billion to face the currency crisis.
The rupee fell to an all-time low of 169.05 per dollar yesterday, surpassing its previous low of 169.00 hit on Friday. It closed at 169.00/169.20 per dollar, compared with Tuesday’s close of 168.90/169.00.
The Central Bank will intervene aggressively to curb excess volatility in the exchange rate, Senior Deputy Governor Nandalal Weerasinghe had told Reuters on Friday.
Exporters expect the rupee to be under pressure due to continued importer dollar demand.
The rupee has weakened 4.6 percent so far this month after a 1.2 percent drop last month and is down 10 percent so far this year.
The dollar rose modestly yesterday before a widely anticipated Federal Reserve interest rate hike priced in by investors still on edge about a trade row between the United States and China.
Dollar buying by foreign banks to facilitate bond outflows and importer demand weighed on the currency but the Central Bank’s intervention prevented a sharp fall in the currency, sources said.
The rupee will be under pressure due to year-end seasonal dollar demand from importers, dealers have said earlier.
The currency has also been hurt by recent weakness in the Indian rupee. India is Sri Lanka’s biggest trading partner and the Indian rupee, which hit a record low on September 18, is Asia’s worst performing currency this year.
Foreign investors sold government securities worth a net Rs.8.8 billion in the week ended September 19, its highest weekly outflow since the week ended December 6. Sri Lanka has suffered a net outflow of Rs.63.7 billion in securities so far this year, the Central Bank data showed.