Rupee closes steady as remittances offset dollar demand

Reuters: The Sri Lankan rupee closed steady yesterday (23 March) as exporter dollar sales and inward remittances offset demand for the US currency in early trade, dealers said.

The rupee closed unchanged at 156.10/15 per dollar.

“Demand (for dollars) was there in the morning. We saw some buying by a state bank, probably to pay a petroleum bill. But in the latter part of the day, we saw some inward remittances,” said a currency dealer.

The rupee touched an all-time low of 156.20 per dollar on Monday (19 March), which was first hit on April 16, but recovered to close the week nearly flat. However, it has weakened 1.76% so far this year after declining 2.5% last year and 3.9% in 2016.

The currency is expected to remain under pressure on continued importer demand for dollars ahead of the traditional New Year in mid-April, dealers said.

A gradual depreciation in the rupee and higher volatility this year are expected on account of debt repayments by the Government, they added.

The International Monetary Fund said on 9 March that Sri Lanka’s economy remains vulnerable to adverse shocks due to its large public debt and low external buffers.

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

Foreign investors sold Government securities worth a net Rs. 3.1 billion in the week ended 14 March, Central Bank data showed.