Rupee extends fall for 6th straight session

Reuters: The Sri Lankan rupee fell for a sixth straight session yesterday on importer dollar demand and further weakness was expected in the currency, traders said.

The rupee closed at 159.25/35 per dollar, compared to 6 July’s close of 159.20/35 per dollar. It has declined 3.8% so far this year.

“The rupee is still on a downward trend,” a currency dealer said.

The market shrugged off 6 July’s monetary policy rate decision by the Central Bank, which left its key rates unchanged as expected, saying a low rates environment and stabilising inflation would support its economy in the face of a fragile currency.

Central Bank Governor Indrajit Coomaraswamy said on 6 July the depreciation was mainly driven by external factors and that emerging-market currencies were under pressure.

The International Monetary Fund (IMF) said last month that Sri Lanka’s economy remained vulnerable to adverse shocks due to a sizeable public debt and large refinancing needs.

Currency dealers said the rupee was weakening gradually after a brief recovery late last week.

Dealers said the downward pressure on emerging market currencies was due to the hike in US rates, trade tensions between China and the United States, and rising oil prices. The spot rupee hit an all-time low of 160.17 per dollar on June 20.

A strengthening dollar since mid-April has increased the credit risk of several emerging markets, including Sri Lanka, due to currency depreciation, ratings agency Moody’s said late last month.

Foreign investors sold Government securities worth a net Rs. 674 million ($4.24 million) in the week ended 4 July, bringing the outflows so far this year to Rs. 29.6 billion, Central Bank data showed.