Friday, 13 March 2015 14:43
COLOMBO: The Sri Lankan rupee was steady on Friday due to moral suasion by the central bank because of importer dollar demand, while exporters looked for direction from market interest rates, which have been rising due to heavy government borrowing.
When rates becomes attractive, exporters are generally expected to convert dollars into rupees, easing downward pressure on the local currency, dealers said.
One-week forwards, which were actively traded, were also steady at 133.60/75 per dollar at 0851 GMT.
“There is importer demand, while exporters are reluctant to sell (dollars),” said a currency dealer on condition of anonymity.
The spot currency was steady for the 13th straight session at 132.90/133.20, well within the limits set by the central bank. Central bank officials were not available for comment.
Indian Prime Minister Narendra Modi, who is in Sri Lanka for a two-day visit, said on Friday the Reserve bank of India had entered into a $ 1.5 billion currency swap agreement with Sri Lanka’s central bank.
“This will help keep the Sri Lankan rupee stable,” Modi told reporters.
Dealers said the market is closely monitoring interest rates amid heavy government borrowing.
Sri Lanka’s new government has borrowed more than $ 1 billion in four days through Thursday, a move which economists blame on poor revenues and higher expenditures.
Yields on t-bills rose between 21 basis points and 38 bps at a weekly auction on Wednesday, with the 91-day t-bill yield rising to a 14-month high of 7.10 percent.
The main stock index was down 0.17 percent, or 12.41 points, at 7,096.66, a five-week low.
Copyright Reuters, 2015
