Rupee hits all-time closing low on importer dollar demand

REUTERS: The Sri Lankan rupee hit a record closing low yesterday, as importers bought dollars while exporters stayed away expecting a further fall in the currency, dealers said.

The rupee fell 0.25 percent to hit a record closing low of 157.60/75 against the dollar, weakening further from its previous record low of 157.30 hit on Tuesday. It has fallen 0.8 percent so far this week and 1.3 percent this month.

“After the rupee hit record lows, importers have panicked and are buying. Exporters are not selling dollars and waiting to see further fall in the rupee,” a currency dealer said.

Some dealers said dollar purchases by oil importers, who usually buy dollars from banks, weighed on the currency. The rupee has weakened 2.5 percent so far this year. It dropped 2.5 percent last year and 3.9 percent in 2016. The International Monetary Fund said last week that the Central Bank should continue to remain vigilant in guarding against inflationary pressures, “while continuing to build reserves and supporting greater exchange rate flexibility”.

Dealers said they expect the rupee to gradually weaken and face higher volatility this year due to debt repayments by the government.

Foreign investors sold government securities worth a net Rs.1.8 billion so far this year through April 18, The Central Bank data showed.