Rupee ends steady; bond flow direction eyed

REUTERS: The Sri Lankan rupee ended steady in thin trade yesterday as mild importer dollar demand offset sales of the greenback by exporters while traders awaited cues on foreign selling in bonds, dealers said.
Rupee forwards were active, with two-week forwards ending at 151.85/95 per dollar, unchanged from Monday’s close.
“There was no big demand. Everybody is on the watch. They are waiting to see the direction, whether there’ll be more bond sales by foreigners,” said a currency dealer on condition of anonymity.
“I don’t know if this is a calm before 
the storm.”
The International Monetary Fund, during the latter part of the trading session, urged the Central Bank to allow flexible exchange rates and stand ready to tighten monetary policy after the island nation missed the net international reserves target in it US$1.5 billion loan programme.
Dealers said the rupee would be under pressure due to dollar demand from importers ahead of the traditional Sinhala-Tamil New Year in mid-April, and as foreign investors continue to sell government securities.
Ratings agency Moody’s said in a report last week that lower agricultural exports and higher imports to make up for the loss in domestic production would weigh on the current account deficit and foreign 
exchange reserves.
The government’s handouts to farming families affected by drought could make the fiscal deficit target a challenge, the rating agency added.

Lower agricultural output due to the drought will force the government to increase imports, dealers said.
The rupee has weakened 1.07 percent so far this year. It fell 3.9 percent last year, following a 10 percent drop in 2015.