Rupee hits record low on strong importer dollar demand

COLOMBO (Reuters) - The Sri Lankan rupee dropped to an all-time low yesterday, marking its ninth straight session of setting fresh lows, as dollar demand from importers remained strong.

The rupee, which hit a fresh record low of 161.55 early in the trade, closed steady at 161.40/50 per dollar. The local currency surpassed its earlier record of 161.50 hit in the previous session. The rupee has declined 1.2 percent this month, and dropped 5.2 percent so far this year.

“The (importer dollar) demand was there. But we have seen some flows, probably remittances for a large local bank, which ease the pressure at the latter part of the day,” 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, analysts said.

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 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.