Spot rupee hits record low on importer dollar demand

REUTERS: The Sri Lankan spot rupee hit a record low of 144.65 per dollar on resumption of trading after a gap of almost one month yesterday, due to importer dollar demand and a day after the Central Bank said it had stopped significant intervention in the market.

Central Bank Governor Arjuna Mahendran said late on Thursday that the monetary authority was not intervening in the market as it had in the past, but stepped in to prevent abnormal imbalances due to one or two large transactions.

“We have a market which is not very liquid. We can’t let one or two transactions completely to knock the rupee either way. So our job is to maintain the stability,” Mahendran told reporters. “We will intervene when you have extra ordinary transactions.”
Mahendran said the Central Bank cannot rule out another rate hike if foreign selling of government securities continues less than a week after it increased the key policy rate by 50 basis points from record lows, to prevent demand-driven inflationary pressure.

Yesterday, the spot currency, which the Central Bank did not allow to trade below 144 levels from Jan. 27, surpassed its previous record low of 144.30 hit on Jan. 4.
It was at 144.20/40 per dollar at 0854 GMT, recouping some of the losses made earlier in the day.
One-week rupee forwards, which acted as a proxy for the spot currency, were at 144.70/80 per dollar after hitting a low of 145.15. They ended at 144.80/85 on Thursday.
The rupee will be under pressure with seasonal import demand picking up ahead of the local New Year season starting in April, a dealer said.

Foreign outflows from the government securities also weighed on the currency.
Foreign investors sold Rs.10.1 billion ($70 million)worth of government securities between Feb. 10 and 17, data from the Central Bank showed, taking the total offloaded since Dec. 30 to Rs.32.47 billion.
Sri Lanka’s main stock index was 0.03 percent weaker at 6,200.65 as of 0855 GMT. Turnover stood at Rs.793.9 million.