Sri Lankan rupee steady; market seeks clarity from budget
COLOMBO: Sri Lankan rupee forwards traded steady on Wednesday as the central bank capped a fall in the currency on importer dollar demand while exporters awaited direction from a supplementary budget scheduled for Thursday, dealers said.
Fears of possible depreciation in the currency kept exporters away from the market.
The central bank capped four-day forward at 133.00, which forced dealers to trade one-week forwards actively for the second straight session, dealers said.
One-week forwards traded steady at 133.45/55 per dollar at 0600 GMT
Four-day forwards quoted at 133.00/40 per dollar at 0551 GMT compared with Tuesday's close of 133.00/133.50. They fell 0.45 percent last week, market data showed.
"The day-to-day import demand is there and exporters are not doing anything, probably awaiting the outcome of tomorrow's budget," a dealer said.
Dealers said concerns over the central bank and the market not agreeing on the price of the currency weighed on sentiment.
Dealers said the market is expecting a depreciation in the short term with the widening trade balance and in line with global currencies.
The spot currency has not been trading, while forwards have been trading with downward pressure as the central bank capped the rupee through moral suasion, dealers said.
The new central bank governor, Arjuna Mahendran, told Reuters on Tuesday that the current foreign exchange policy does not need "any big changes" and expects the currency to stabilise ending the depreciation trend since August. Some dealers said exporters are waiting for clarity from the new government's economic policy as they are confused after the central bank governor kept rates steady on Tuesday, saying the economy was doing well, but the finance minister criticised the previous government's economic management.,
Finance Minister Ravi Karunanayake will present the supplementary budget on Thursday, aiming to fulfil election pledges by President Maithripala Sirisena that included pay hikes for the state sector and price reductions on essential goods.
The market had been expecting a flexible exchange rate with more foreign grants under the new government as opposed to the controlled exchange rate regime earlier.
The main stock index was up 0.3 percent or 21.85 points at 7,390.33 at 0546 GMT, trading at its highest since Jan. 20. -Reuters