Rupee ends steady; importer dollar demand weighs on market

Reuters: The Sri Lankan rupee ended steady yesterday as greenback sales by banks and exporters offset importer demand for dollars, dealers said.

The spot rupee ended at 153.65/70 per dollar, hardly changed from Wednesday’s close of 153.65/75.
“There was (importer) demand in the morning. But in the latter part of the day, we saw some (dollar) conversions which helped the currency to end steady,” said a currency dealer, requesting anonymity.

The Central Bank has completely stopped defending the rupee unlike in the past, Deputy Governor Nandalal Weerasinghe told Reuters on Wednesday.

Weerasinghe in an interview with Reuters said the Central Bank has only been buying dollars since February, and not sold any at all.

He said the Central Bank does not see any pressure on the rupee and the currency is determined through market-driven demand and supply.

Weerasinghe added that if the monetary authority does not intervene and buy, probably the rupee will appreciate and the Central Bank is “buying and preventing certain appreciation”.

The market has priced in further depreciation due to the Central Bank’s no-intervention policy, dealers said.

The rupee has dropped around 2.6 percent so far this year.

The spot rupee resumed trading on June 19 for the first time since May 5, when the Central Bank fixed its reference rate at 152.50.

Dealers said they expected seasonal demand for dollars to pick up from August.

The Central Bank is compelled to buy dollars from the market to meet the reserve target set by the International Monetary Fund under a US$1.5 billion, three-year loan programme.