REUTERS: The Sri Lankan rupee closed marginally down yesterday on importer dollar demand in light trading ahead of the traditional festival this week, dealers said.
The rupee closed at 155.65/75 per dollar, compared with Tuesday’s close of 155.55/65.
“There was dollar demand from some small banks. But the trading volume was very thin and many market players are on leave due to the upcoming new year,” said a currency dealer.
The Central Bank governor last week said if inflation rate can be maintained between 4-5 percent, the depreciation in the rupee would be around 2-3 percent.
Sri Lanka is marketing two tranche of sovereign bonds with five-year tranche has indicated at initial price guidance of 6 percent area and a 10-year tranche at 7 percent area.Sri Lanka had planned to raise US $ 2 billion from dollar bonds this year.
Currency dealers said inflows from sovereign bonds will boost the rupee.
The Central Bank has so far during the year purchased over US $ 400 million from the domestic foreign exchange market to build up international reserves. Dealers expect pressure on the currency to ease with more inward remittances ahead of the traditional New Year on April 14.
The currency has recovered and risen 0.35 percent since it hit a record low of 156.20 per dollar on March 16. The rupee has weakened 1.45 percent so far this year after declining 2.5 percent last year and 3.9 percent in 2016.
A gradual depreciation in the rupee and higher volatility are expected this year on account of debt repayments by the government, dealers have said.
The International Monetary Fund in March said that Sri Lanka’s economy remained vulnerable to adverse shocks due to its large public debt and low external buffers. The government must repay an estimated Rs.1.97 trillion in 2018 - a record – including US $ 2.9 billion of foreign loans and a total of US $ 5.36 billion in interest.
Foreign investors sold government securities worth a net Rs.6.3 billion so far this year through April 4, the Central Bank data showed.