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Rupee ends weaker on importer dollar demand


Comments / {{hitsCtrl.values.hits}} Views / Tuesday, 10 April 2018 00:21


Reuters: The Sri Lankan rupee ended marginally weaker on Monday on dollar demand for oil and vehicle imports, but the local currency is expected to bounce back on inflows from inward remittances ahead of the traditional festival this week, dealers said.

The rupee, which traded at 155.30 per dollar earlier in the session, closed 0.1% weaker at 155.50/60 per dollar, compared to Friday’s close of 155.35/45.

“There was importer dollar demand, mainly for oil and vehicles. A state bank was on the buying side,” said a currency dealer. “From tomorrow onwards, we don’t see much importer demand and the rupee could regain and trade between 155.20/75.”

Another dealer said inward remittances ahead of Saturday’s (14 April) traditional Sinhala and Tamil New Year could help boost the currency.

The Central Bank Governor said on 11 April that if inflation rate can be maintained between 4-5%, the depreciation of the rupee would be around 2-3%.

The Central Bank said that it had so far purchased over $400 million from the domestic foreign exchange market to build up international reserves during the year.

Sentiment has improved after Prime Minister Ranil Wickremesinghe survived a No-Confidence Motion last week.

The Central Bank unexpectedly cut its key lending rate by 25 basis points on 11 April as policy makers sought to revitalise an economy growing at its weakest pace in 16 years.

Dealers expect pressure on the currency to ease with more inward remittances ahead of the Traditional New Year on Saturday.

The currency has recovered and risen 0.45 % since it hit a record low of 156.20 per dollar on March 16. The rupee has weakened 1.34% so far this year after declining 2.5% last year and 3.9% in 2016.

A gradual depreciation in the rupee and higher volatility are expected this year on account of debt repayments by the Government, dealers have said. The International Monetary Fund said in March that Sri Lanka’s economy remained vulnerable to adverse shocks due to its large public debt and low external buffers.

The Government must repay an estimated LKR 1.97 trillion ($12.68 billion) in 2018 - a record - including $2.9 billion of foreign loans and a total of $5.36 billion in interest.

Foreign investors sold Government securities worth a net LKR 6.3 billion ($40.53 million) so far this year till April 4, Central Bank data showed.


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