REUTERS: Sri Lankan five-day rupee forwards edged up yesterday as dollar sales by a foreign bank outpaced importer demand, while some investors awaited direction after the Finance Ministry told exporters to bring earnings back home, dealers said.
The market is also waiting for the Central Bank’s April monetary policy announcement scheduled for 1130 GMT today, when it is expected to keep key interest rates steady, a Reuters poll showed. However, a surprise hike is not ruled out as five out of 11 analysts expect the Central Bank to raise policy rates to keep government borrowing in check through tighter financing conditions. The five-day forwards, which are known as spot next and act as a proxy for the spot currency, ended at 146.40/60 per dollar, compared with Friday’s close of 146.50/60. Finance Minister Ravi Karunanayake on Friday ordered exporters to repatriate export earnings received on or after April 1 to improve foreign exchange inflows to the country.
“The government’s order came after repeated failure by exporters to bring back their earnings,” said a currency dealer, requesting not to be named. “First, a few exporters said they were waiting to see the rupee depreciate to 135 per dollar.
Then, they said 140, and later 145. But they never brought the dollars despite the Central Bank allowing depreciation.” A few dealers said the move was negative because it could dent investor sentiment.
“Forcing exporters to bring in their earnings is against the good governance principles of the government,” an exporter said on condition of anonymity. “The government should have consulted all exporters instead of discussing it with only top 20 exporters.” Central Bank Governor Arjuna Mahendran on April 12 said the monetary authority has been intervening to smoothen volatility in an illiquid market. The spot rupee, which has barely seen any trading since January 27, was not actively traded yesterday as well. The rupee has been under pressure as foreign investors have sold government securities amid the country’s economic woes, but they net bought bonds worth Rs.11.7 billion in the last four weeks till April 20, Central Bank data showed.