Rupee rises on exporter dollar sales

Reuters: The Sri Lankan rupee gained further yesterday due to dollar-selling by exporters and a state bank, days after the Central Bank said underlying fundamentals do not warrant the current downward pressure on the currency.

The rupee hit a record low for a third straight session on Wednesday (16 May) at 158.50 per dollar after the Central Bank Chief said on 11 May that the currency would depreciate gradually as dollar outflows surpass inflows.

The spot rupee closed at 157.60/90 per dollar, compared with Thursday’s (17 May) close of 157.65/95.

“There were some inflows today. We saw some exporter (dollar) sales and also a state bank sold dollars,” a currency dealer said.

The currency has declined 0.03% so far this month after a 1.5% fall in April. It has fallen 2.8% this year.

The pressure on the currency is unwarranted as the gross external reserves are at $9.1 billion and the real effective exchange rate indexes indicate that the currency is competitive, the Central Bank said on Wednesday.

The Central Bank is “studying carefully” if there was extra pressure on the currency than what was expected, and also the behaviour of market participants, Central Bank Chief Indrajit Coomaraswamy had said yesterday.

The Central Bank said on 26 April that it would intervene to support the rupee when necessary, and there was no reason for the rupee to be under pressure given the country’s record $10 billion foreign currency reserves.

Dealers said they expect the rupee to gradually weaken and face higher volatility this year due to debt repayments by the Government.

Senior Central Bank Deputy Governor Nandalal Weerasinghe had said last week debt repayments by the Government will not have an impact on the currency as they are managed with borrowed money externally.

Foreign investors sold Government securities worth a net Rs. 4.05 billion ($25.63 million) in the week ended 9 May, bringing the outflow so far this year to Rs. 9.8 billion, Central Bank data showed.