Rupee forwards end lower on importer dollar demand

Thursday, 11 February 2016 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Sri Lankan rupee forwards ended slightly weaker on Wednesday as importers sought more dollars, with dealers saying they expect the currency to depreciate further due to higher imports and lack of inflows.

Rupee forwards have been active since Jan. 27 as there has been little trading in the spot currency, with banks reluctant to trade below the 144.00 level amid moral suasion by the central bank.

Central bank officials were not immediately available for comment.

One-week rupee forwards, which act as a proxy for spot, ended at 144.35/40 per dollar compared with Tuesday’s close of 144.32/35.

“There was demand for (dollars) for some dollar payments from a foreign bank. It could be either for imports or some dividend payments. There is not much inflow and importer demand is high,” said a currency dealer asking not to be named.

Another dealer said small banks have been buying dollars at lower than market rates amid greater demand for the greenback.

“It is a dicey situation. We don’t see much inflows though there is a lot of outflow scheduled in the short term,” he said.

Sri Lanka needs to pay more than $5 billion in foreign loans including interest payments, according to central bank data.

Dealers said the central bank would not be able to hold the rupee at current levels without strong dollar inflows.

The central bank usually intervenes in times of high volatility though it floated the rupee on Sept. 4.

Commercial banks parked 48.2 billion rupees ($334.68 million) of surplus liquidity on Wednesday, using the central bank’s deposit facility at 6%, official data showed.