Rupee hits record low on year-end payments

Tuesday, 15 December 2015 00:00 -     - {{hitsCtrl.values.hits}}

Reuters: The Sri Lankan rupee hit a record low on Monday due to dollar demand from importers and for dividend payouts by multinational firms, dealers said.

The rupee fell 0.35% to 143.65 per dollar during the day, extending its decline from the previous record trough of 143.40 hit on Friday.

The currency ended at 143.60/80 per dollar compared with Friday’s close of 143.35/40.

“Some companies bought dollars to pay dividend and for other payments,” said a currency dealer, asking not to be named.

“Banks are holding on (to dollars) without selling, expecting further weakening (of the rupee).”

Analysts said the local currency had been hit by the global volatility and the rupee would be under pressure until the Central Bank takes measures to arrest excess rupee liquidity.

Volatility swept through world markets on Monday with China’s yuan hitting a fresh multi-year low and oil’s continued travails adding to nervousness before an expected hike in U.S. interest rates later this week.

The rupee has fallen 8.7% so far this year. It has slipped 6.2% since the Central Bank floated the local currency on 4 September. Dealers, however, say the Central Bank has been intervening in the forex market via moral suasion and dollar selling.

The Central Bank sold dollars worth a net $306 million in November, $277.95 million in October and $523.80 million in September, latest data showed. Dealers said part of that money was spent to defend the rupee.

Commercial banks parked 63.57 billion rupees of surplus liquidity on Monday using the Central Bank’s deposit facility at 6%, official data showed.