Rupee hits record low on importer dollar demand

(Colombo) REUTERS: The Sri Lankan rupee hit an all-time low of 161.10 per dollar yesterday, dragged down by importer dollar demand and less inflows of the greenback, dealers said.

The rupee closed at 161.05/20 per dollar, compared with Friday’s close of 160.85/161.00.

The local currency surpassed its earlier record of 160.96 hit in the previous session.

The rupee declined 0.9 percent so far this month and 4.9 percent so far this year.

“There was demand today mainly for bond outflows and also some dividend payments,” a dealer said, requesting anonymity.

“With the currency under pressure people might not sell until they see a clarity. The inflows are slow, may be, because of the Hajj festival holidays. The Central Bank does not seem to be concerned. We can’t see them intervening.”

The rupee will be under depreciation pressure with the yearend seasonal importer demand, dealers said. Absence of dollar conversions by exporters and outflows from equities also pushed the rupee lower, said analysts.

Foreign investors sold shares worth a net Rs.888.8 million in the last five sessions through Tuesday.

Exporters are holding on to dollars as they expect the local currency to decline further, dealers said.

The Sri Lankan currency is also hurt by weakness in the Indian rupee. India is Sri Lanka’s biggest trading partner and the country’s currency, which hit a record low on August 16, is one of the worst performers in Asia this year.

Foreign investors sold government securities worth a net Rs.7.5 billion in the week ended August 21, bringing the outflow so far this year to Rs.47.4 billion, the Central Bank data showed.