Rupee erases early losses to end flat

(Colombo) REUTERS: The Sri Lankan rupee hit a near-record low yesterday as weakness in emerging market currencies weighed, but later recovered to end the day flat, dealers said.

The rupee, which hit an intraday low of 160.15 per dollar, ended at 160.00/10, unchanged from Friday’s close. It hit a record low of 160.17 on June 20 and has declined 4.2 percent so far this year.
“There was importer demand early in the day and it was usual demand. There was no new demand. 
The global worries have hit the sentiment,” said a currency dealer, asking not to be named.

“The Central Bank has been doing the correct thing by allowing the market to decide the exchange rate. The rupee has been hovering around the 160.00 level for the past two months. But heavy foreign outflows from government securities may trigger a sharp depreciation.”

The euro slid to a fresh 13-month low and emerging market currencies slumped further yesterday while the yen surged to a six-week high as the fallout from the Turkish lira’s crash pushed more investors into safe-haven currencies.

On August 3, the Central Bank left its key policy rates unchanged, saying the decision backed its goals of stabilising inflation and fostering sustainable economic growth.

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 in the week ended August 8, bringing the outflow so far this year to Rs.39.1 billion, the Central Bank data showed.