REUTERS: The Sri Lankan rupee ended marginally higher yesterday due to inward remittances ahead of the Hajj, though gains were capped by importer demand for dollars, dealers said.
Exporters held on to the greenback on expectations of further depreciation, they added. The spot rupee ended at 140.90/95 per dollar, compared with Tuesday’s close of 140.95/141.05. It has fallen 4.4 percent since the Central Bank effectively floated it on September 4.
“There were some inflows due to Hajj. Importer dollar demand was also there,” said a currency dealer, asking not to be named. “But exporters were not selling.”
Dealers said the rupee is under pressure, and regulations need to be brought in to make exporters convert their export proceeds.
The market expects no impact on the rupee from the Central Bank’s monetary policy rate announcement scheduled for Friday.
On Tuesday, the rupee hit a record low of 141.00 in early trade before recovering as a state bank, through which the Central Bank usually directs the market, sold dollars to limit the fall.
The market expects the currency to fall further in the short term if the Central Bank fails to tighten interest rates or the country does not see strong inflows soon, some dealers said.
The rupee float has won a thumbs-up from rating agencies and economists, but more reforms will be needed to support the currency and conserve the Central Bank’s modest reserves. In a bid to curb dollar outflows on vehicle purchases, the Central Bank on September 15 imposed a 70 percent limit on loans and advances for vehicles, a move seen aimed at easing demand for credit and stemming dollar outflows.