COLOMBO: The Sri Lankan rupee ended marginally weaker on Monday on dollar demand for oil and vehicle imports, but the local currency is expected to bounce back on inflows from inward remittances ahead of the traditional festival this week, dealers said.
The rupee, which traded at 155.30 per dollar earlier in the session, closed 0.1 percent weaker at 155.50/60 per dollar, compared with Friday’s close of 155.35/45.
“There was importer dollar demand, mainly for oil and vehicles. A state bank was on the buying side,” said a currency dealer.
“From tomorrow onwards, we don’t see much importer demand and the rupee could regain and trade between 155.20/75 range.”
Another dealer said inward remittances ahead of Saturday’s traditional Sinhala and Tamil New Year could help boost the currency.
The central bank governor on Wednesday said if inflation rate can be maintained between 4-5 percent, the depreciation in the rupee would be around 2-3 percent.
The central bank said that it had so far during the year purchased over $400 million from the domestic foreign exchange market to build up international reserves.
Sentiment has improved after Prime Minister Ranil Wickremesinghe survived a no-confidence motion last week.
Sri Lanka’s central bank unexpectedly cut its key lending rate by 25 basis points on Wednesday, as policy makers sought to revitalise an economy growing at its weakest pace in 16 years.
Dealers expect pressure on the currency to ease with more inward remittances ahead of the traditional New Year on April 14.
The currency has recovered and risen 0.45 percent since it hit a record low of 156.20 per dollar on March 16. The rupee has weakened 1.34 percent so far this year after declining 2.5 percent last year and 3.9 percent in 2016.
A gradual depreciation in the rupee and higher volatility are expected this year on account of debt repayments by the government, dealers have said.
The International Monetary Fund in March said that Sri Lanka’s economy remained vulnerable to adverse shocks due to its large public debt and low external buffers.
The government must repay an estimated 1.97 trillion rupees ($12.68 billion) in 2018 – a record – including $2.9 billion of foreign loans and a total of $5.36 billion in interest.
Foreign investors sold government securities worth a net 6.3 billion rupees ($40.53 million) so far this year through April 4, central bank data showed.
Source: Brecorder
