Sri Lanka rupee ends weaker; further fall likely

COLOMBO: The Sri Lankan rupee ended weaker on importer demand for dollars, and dealers expect the local currency to fall further in the coming days in the absence of strong foreign inflows.
However, the central bank expected the currency to stabilize due to $209 million in inflow raised through Sri Lanka Development Bonds from a number of Middle East banks.
The rupee spot next or one-day forward, which was active in the market in the absence of spot trade, fell to 133.05/25 per dollar, compared with Wednesday’s close of 133.05/15.
Dealers said demand for four-day spot forward picked up as spot next or three-day forward were not active.
Central Bank Governor Ajith Nivard Cabraal said there was no volatility in the rupee exchange rate for the last one week.
“We have raised $209 million through Sri Lanka Development Bonds from some Middle East banks. The inflow will help stabilize the currency,” Cabraal said referring to an unannounced bond sale.
Currency dealers said the inflow helped to ease the downward pressure on the rupee, but the currency cannot be defended continuously in such a manner.
It hit a record low of 135.20 to the dollar last week, before recovering slightly. The central bank said the fall was an aberration due to unusually thin trade.
The spot rupee was quoted at 132.95/133.05, Thomson Reuters data showed.
The rupee has been falling since early July with foreign investors pulling out of Sri Lankan treasury bonds as US treasury yields rose on expectations the Federal Reserve would soon begin to taper its big bond buying program.
The rupee has fallen about 5 percent since June 7 and nearly 4.1 percent this year, after depreciating by about 10 percent in 2012.