REUTERS- The Sri Lankan rupee strengthened in one-week forwards yesterday, as foreign banks sold dollars on behalf of offshore investors to buy local bonds, dealers said.
The spot rupee is tightly managed by the Central Bank and market participants use the forward market levels for guidance on the currency.
Many dealers said the Central Bank did not intervene for the fourth straight session since the appointment of the new Central Bank Governor.'
The rupee in one-week forwards, which have been acting as a proxy for the spot rupee, stood at 145.40/60 per dollar at 0543 GMT, stronger than Thursday’s close of 146.15/30.
“Foreign banks are selling (dollars) as foreign investors are buying into bonds,” said a currency dealer, asking not to be named. Another dealer confirmed that foreign investors were buying rupee bonds.
Speaking in his first meeting with the media, after market hours on Tuesday, the new Central Bank Governor, Indrajith Coomaraswamy, said the monetary authority would manage the exchange rate flexibly and not have too much volatility. He said capping the spot rate was “something that has been kept constantly under review if and when there is a requirement to move on the exchange rate.” Nandalal Weerasinghe, the Central Bank Deputy Governor, said on Tuesday the level of central bank intervention had come down drastically and that it had been absorbing dollars instead of selling.
Both spot rupee and spot-next were not quoted, dealers said. The Sri Lankan stock index was up 0.43 percent at 6,337.78 as of 0545 GMT, on a turnover of Rs.509.1 million ($3.51 million).