Rupee weakens further to fresh record low

COLOMBO (Reuters) - The Sri Lankan rupee dropped to an all-time low yesterday, marking its eighth straight session of setting fresh record lows, as dollar demand from importers remained strong amid sluggish inflows. The rupee, which hit a fresh record low of 161.50 early in the day, closed steady at 161.40/50 per dollar, compared with Wednesday’s close.

The local currency surpassed its earlier record of 161.43 hit in the previous session. The rupee has declined 1.1 percent so far this month and 5.2 percent so far this year. “There was importer dollar demand continuously. There were some remittances but the importer demand was high,” a dealer said, requesting anonymity.

The rupee will be under depreciation pressure with the year-end seasonal importer demand, dealers said.

Absence of dollar conversions by exporters and outflows from equities and government securities also pushed the rupee lower, said analysts.

Exporters are holding on to dollars as they expect the local currency to decline further, dealers said.

The Sri Lankan currency is also hurt by weakness in the Indian rupee. India is Sri Lanka’s biggest trading partner and the country’s currency, which hit a fresh record low yesterday, is one of the worst performers in Asia this year.

Foreign investors sold government securities worth a net Rs.7.5 billion (US$46.5 million) in the week ended Aug. 21, bringing the outflow so far this year to Rs.47.4 billion, Central Bank data showed.