REUTERS: Sri Lankan rupee forwards ended weaker yesterday due to importer dollar demand amid apprehension the currency would weaken on a possible increase in government spending after the country’s worst natural disaster since 2004, dealers said. The cost of landslides and floods after days of torrential rains will be between $1.5 billion and $2 billion at the minimum, the government said earlier this week, as the Indian Ocean island struggles to recover from a cyclonic storm.
The dollar/rupee forwards, known as spot next, ended at 147.40/50 per dollar, compared with Wednesday’s close of 147.05/30. The spot next, which acts as a proxy for the spot currency, indicates the exchange rate for the day following the conventional spot settlement, which is five days ahead for yesterday’s trade. “There was importer demand. But dealers are reluctant to trade (forwards) below 147.50 fearing repercussions from the Central Bank, and we have seen Central Bank offering to some select trades at 145.80,” a currency dealer said, asking not to be named.
Central Bank officials were not available for comment. The government was in the process of borrowing up to $3.5 billion from foreign sources via syndicated loans, sovereign bonds, and Islamic bonds, Finance Minister Ravi Karunanayake said on Wednesday. Analysts said foreign inflows from such loans or bond issues would ease pressure on the rupee. The spot currency did not trade yesterday. The spot rupee reference rate has been pegged at 145.75, dealers said. Sri Lanka’s Central Bank had fixed the spot rate at 143.90 per dollar until May 2.