Rupee extends losses on importer dollar demand

Friday, 6 July 2018 00:00 -     - {{hitsCtrl.values.hits}}

Reuters: The rupee ended lower for a fourth straight session yesterday as demand for importer dollar outpaced inflows from inward remittances, dealers said.

The rupee ended at 158.90/159.10 per dollar, compared with Wednesday’s close of 158.60/75 per dollar.

“There was demand today, and we did not see the State bank’s dollar selling in the market. The regional currencies are also under pressure. That impact is also there,” a currency dealer said.

Dealers said the downward pressure on currencies seen in emerging markets was due to the hike in US Federal rates, the trade war between China and the United States, and the rise in oil prices. The spot rupee hit an all-time low of 160.17 per dollar on 20 June and is down 3.4% so far this year.

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.

A strong dollar would also lead to a drop in foreign exchange reserves of countries such as Argentina, Ghana, Mongolia, Pakistan, Sri Lanka, Turkey and Zambia, Moody’s said. The downward pressure on the rupee has shown signs of easing after the Nation received more than half a billion dollars from a Chinese port operator last month.

China Merchants Port Holdings made a $ 584 million payment as part of a $ 1.12 billion deal to operate the deep sea Hambantota port.

The International Monetary Fund (IMF) said last month that Sri Lanka’s economy remains vulnerable to adverse shocks because of sizable public debt and large refinancing needs.

Foreign investors sold government securities worth a net Rs. 3.5 billion ($ 22.11 million) in the week ended 27 June, bringing the outflows so far this year to Rs. 29 billion, Central Bank data showed.