Rupee hits record low for 4th straight day

Tuesday, 18 September 2018 00:17 - - {{hitsCtrl.values.hits}}

Reuters: The rupee touched a fresh low of 165.10 per dollar on Monday due to higher dollar demand from importers and banks to facilitate foreign bond outflows amid exporters who were reluctant to sell the US currency, market sources said.

Exporters expect the rupee to be under pressure due to continued importer dollar demand and less exporter dollar sales.

Emerging market currencies were mostly weaker after a strong run last week following the Turkish Central Bank’s decision to sharply raise interest rates to shore up confidence in the lira.

The rupee touched a fresh low of 165.10 per dollar, Reuters data showed, surpassing its previous low of 163.60 hit in the previous session. It ended at 165.00/30 per dollar, weaker from Friday’s close of 163.60/70.

The sources said an illiquid market for dollars, dollar buying by foreign banks to facilitate bond outflows and importer demand weighed on the currency.

The Finance Ministry would not intervene in exchange rate management, Junior Finance Minister Eran Wickramaratne said last Thursday at an economic forum, adding that the Central Bank would intervene as and when necessary to curb excess volatility in the exchange rate and also punish speculators.

The country’s Central Bank cut the net open positions of the banks on 6 September to increase dollar liquidity, forcing commercial banks to sell dollars.

Since last week, currency dealers have been refusing to speak to the media, citing instructions from the Central Bank. However, Central Bank Governor Indrajit Coomaraswamy said late on Tuesday that he was unaware of any such move.

The rupee has weakened 2.1% this month after a 1.2% drop last month, and has declined 7.4% so far this year.

It will be under pressure due to year-end seasonal dollar demand from importers, dealers have said.

The currency has also been hurt by weakness in the Indian rupee. India is Sri Lanka’s biggest trading partner and the Indian rupee, which also hit a record low on Wednesday, is Asia’s worst performing currency this year.

Foreign investors sold government securities worth a net Rs. 2.6 billion ($ 15.78 million) in the week ended 12 September, extending the net outflow so far this year to Rs. 55.9 billion worth of securities, Central Bank data showed.