Rupee ends steady in dull trade

REUTERS: The Sri Lankan rupee closed steady yesterday in dull trade, as demand for dollars from importers and banks offset conversion of the US currency by exporters, dealers said.

The spot rupee, which traded at 153.80 per dollar during the day, ended at 153.70/80 per dollar, unchanged from Tuesday’s close.

The currency fell 2.5 percent last year and dropped 3.9 percent in 2016.

“It was a dull day. There were not many importers in the market and the exporters are also reluctant to come as they are awaiting the Central Bank’s directive on derivatives,” said a currency dealer.

The Central Bank, while announcing its key economic policies for this year, said the conduct of monetary policy is dependent on an effective and prudent exchange rate policy.

“It has allowed more flexibility in determining the exchange rate based on the market conditions and has intervened only to smoothen volatility and to build up reserves,” the Central Bank said in its policy statement.

“It is noteworthy that there has been a build-up of non-debt creating international reserves during 2017, with minimal impact on the exchange rate.”

It also said that foreign exchange intervention policies will be adopted consistent with a flexible exchange rate regime and supportive of improving foreign exchange market functionality, and maintaining a competitive exchange rate will be an important objective.

Dealers said the import pressure will be seen until the Central Bank sorts out the new derivatives regulations, which has slowed forward trading in the currency.