Rupee hits record low on late importer dollar demand

29 December 2015 03:28 am - 0     - {{hitsCtrl.values.hits}}


REUTERS: The Sri Lankan rupee fell to an all-time low yesterday as late importer dollar demand weighed on the local currency, currency dealers said.
Trading, however, was thin as many investors stayed on the sidelines due to year-end holidays, the dealers said.

The rupee fell 0.2 percent to a record low of 143.95, surpassing its earlier all-time low of 143.80 hit on Dec. 15. It closed at 143.90/144.00 per dollar, down from Wednesday’s close of 143.70/75.

The markets were closed on Thursday for a Buddhist religious holiday and on Friday for Christmas.

“The lowest deal was done at 143.95. There was low dollar liquidity and no exporter conversions in the market. Some late importer dollar demand dragged the rupee and a private bank was seen selling some dollars,” a currency dealer said on condition of anonymity.

“We still believe the rupee will depreciate further in 2016 if the Central Bank does not tighten the monetary policy.”

The currency has fallen 6.4 percent since the Central Bank allowed free float of the rupee on Sept. 4, and it is expected to weaken further in 2016 due to lower reserves and higher imports, say currency dealers.

The rupee has fallen 8.9 percent so far in the year.

Dealers expect some direction on the interest rates from the Central Bank’s December monetary policy announcement scheduled for Dec. 30 at 7:30 p.m.
The currency may however strengthen if foreign exchange inflows increase, dealers said.

Finance Minister Ravi Karunanayake told Reuters last Wednesday that Sri Lanka is expected to get US $1 billion from offshore investors within a month, a move that could boost the island nation’s faltering reserves.

Commercial banks parked Rs.47.7 billion rupees of surplus liquidity yesterday using the Central Bank’s deposit facility at 6 percent, while they borrowed Rs.102 million through the Central Bank’s lending facility at 7.5 percent, official data showed.

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