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Saturday, 18 February 2017 02:05 - - {{hitsCtrl.values.hits}}
Reuters - The rupee ended weaker in a shortened session on Friday on dollar demand from a foreign bank for dividend payment and as foreign investors sold government securities amid concerns of further depreciation in the rupee, dealers said.
Rupee forwards were active, with one-month forwards ending at 152.70/80 per dollar, weaker from Thursday’s close of 152.00/15.
Two-week forwards ended at 151.80/152.00 per dollar, down from Thursday’s close of 151.60/70.
“The currency is under pressure with the Finance Minister’s comment that the rupee needs to be controlled as well as the delay in Chinese projects,” said a currency dealer, requesting not to be named.
Sri Lanka could face balance-of-payments pressure due to foreign outflows from government securities, a government document showed on Thursday, even as the island-nation is in the process of raising up to $2.5 billion from foreign borrowing.
Foreign investors have net sold Rs. 31.38 billion ($208.30 million) worth of government securities in the four weeks up to 8 February, according to latest Central Bank data.
Finance Minister Ravi Karunanayake on Tuesday said that protecting a fragile rupee was more important than controlling interest rates as the local currency tended not to rebound after depreciating.
Reuters reported that China will delay a planned $1.1 billion investment in a port on its modern-day “Silk Road” until Sri Lanka clears legal and political obstacles to a related project, sources familiar with the talks said, piling more pressure on the island-nation.
Central Bank Governor Indrajit Coomaraswamy said last week the bank was not planning to abruptly stop supporting the rupee.
The rupee has weakened 0.84% so far this year, under pressure from rising imports and net selling of government securities by foreign investors. It fell 3.9% last year, following a 10% drop in 2015.
The Central Bank kept its key rates steady last week for a sixth straight month, but flagged possible “corrective measures” in the months ahead, in a sign that further tightening might be on the cards to temper inflation pressures and safeguard a fragile rupee.
The foreign exchange market traded for half a day due to a special holiday in lieu of National Day which fell on 4 February.
