Rupee hits near-record low on Indian currency weakness

(Colombo) REUTERS: The Sri Lankan rupee hit a near-record low yesterday on weakness in emerging-market currencies including the Indian rupee, and importer dollar demand, dealers said.

The rupee, which fell to a low of 160.15 per dollar in intraday trade, closed at 160.10/25, compared with Monday’s close of 160.00/10. It hit a record low of 160.17 on June 20 and has declined 4.3 percent so far this year.

“There was importer demand. But more than that, the fall in Indian currency weighed on sentiment,” a currency dealer said asking not to be named.

“There were exporter conversions as well while the Central Bank did not intervene in the market. If the Indian rupee falls further, there could be downward pressure on the Sri Lankan rupee.”The Indian rupee touched an all-time low against the dollar in early trade as concerns about Turkey’s economic woes spreading to other emerging markets such as India persisted.

India is one of the main trading partners of Sri Lanka.

Sri Lanka’s Central Bank Governor, Indrajit Coomaraswamy had told reporters that several emerging-market currencies had declined more than the Lankan rupee, adding, “If we reduce rates that would put further pressure on the exchange rate.”

Sri Lanka earlier this month raised import duties on small hybrid cars by more than 50 percent to boost revenue and curb a sharp fall in the rupee.

Coomaraswamy had said earlier that the rupee’s decline was driven mainly by external factors.

Foreign investors sold government securities worth a net Rs.2.56 billion (US $16.01 million) in the week ended Aug. 8, bringing the outflow so far this year to Rs.39.1 billion, the Central Bank data showed.