Rupee firms as exporters, foreign banks sell dollar

Reuters: The Sri Lankan rupee ended firmer yesterday as exporters and some foreign banks sold the dollar, surpassing importer demand for the US currency, traders said.

The rupee traded at 159.90 early in the session and closed at 159.45/65 per dollar, compared with Friday’s close of 159.90/160.05. It has declined 3.9% so far this year and hit a record low of 160.17 on 20 June.

Chinese President Xi Jinping has offered Sri Lanka a fresh grant of CNY 2 billion ($ 295 million), as Beijing looks to expand its influence in the country.

“There was (dollar) demand, but foreign banks were on the selling side today. Maybe after the news of the Chinese grant, they are selling,” said a currency dealer, asking not to be named.

Sri Lanka’s Central Bank Governor Indrajit Coomaraswamy had said earlier that the rupee’s decline was driven mainly by factors outside of Sri Lanka and that emerging-market currencies were under pressure.

The Central Bank is concerned that dollar hoarding and market manipulation are exacerbating the rupee’s weakness and has the tools to correct any misalignment in the exchange rate, Coomaraswamy told Reuters.

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

Foreign investors sold government securities worth a net Rs. 1.98 billion ($ 12.4 million) in the week ended 18 July, bringing the outflows so far this year to Rs. 31.6 billion, Central Bank data showed.