Rupee edges lower on thin importer dollar demand

(Colombo) REUTERS: The Sri Lankan rupee closed slightly weaker yesterday in dull trade as thin dollar demand from importers and banks outpaced little inflows from inward remittances, dealers said.
The rupee ended at 158.35/45 per dollar, compared with Friday’s close of 158.20/35.

“It was a dull day and we saw some importer dollar demand. There were remittances, which were not enough to meet the day’s importer demand,” a currency dealer said.

The spot rupee hit an all-time low of 160.17 per dollar on June 20 and is down 3.1 percent so far this year. A strengthening dollar since mid-April has increased the credit risk of several emerging markets, including Sri Lanka, due to currency depreciation, ratings agency Moody’s said on Wednesday.

Moody’s said a strong dollar would also lead to a drop in foreign exchange reserves of countries such as Argentina, Ghana, Mongolia, Pakistan, Sri Lanka, Turkey and Zambia.

The downward pressure on the rupee has shown signs of easing after the island nation received more than half a billion dollars from a Chinese port operator last month.

China Merchants Port Holdings made a US $ 584 million payment as part of a US $ 1.12 billion deal to operate the deep sea Hambantota port.

The International Monetary Fund (IMF) said last month Sri Lanka’s economy remains vulnerable to adverse shocks because of sizable public debt and large refinancing needs.

Foreign investors sold government securities worth a net Rs.3.5 billion in the week ended June 27, bringing the outflows so far this year to Rs.29 billion, the Central Bank data showed.