Rupee ends firmer after hitting fresh low

(Colombo) REUTERS: Sri Lankan rupee hit a fresh low for the 13th straight session yesterday, but ended firmer after the Central Bank cut the net open positions of commercial banks, dealers said.

The local currency hit a fresh low of 162.65 per dollar during the day, hurt by stronger demand for the dollar from importers amid weakness in regional currencies.

However, the currency ended 0.5 percent firmer at 161.40/80, firmer from Wednesday’s close of 162.20/30.

The rupee recovered to 161 during the day as banks sold dollars after the Central Bank cut their net open positions (NOP), dealers said.

“The rupee ended firmer after the Central Bank cut the NOP of banks by 80 percent. I don’t know why the central bank got panicked now. It’s a global phenomenon and not a domestic one,” said a dealer who requested anonymity.

Central Bank officials were not immediately available for comment.

Junior finance minister Eran Wickremaratne on Tuesday told Reuters that Sri Lanka will not intervene in the foreign exchange market and the government will leave it for market forces to decide.

The currency has weakened a 1.2 percent last month and it has dropped 5.2 percent so far this year.

The rupee will be under depreciation pressure with the year-end seasonal importer dollar demand, dealers added.

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

The Indian rupee fell to 72 to the dollar yesterday as fears of contagion from Argentina and other emerging markets kept investors on edge.

Foreign investors bought government securities worth a net Rs.578.3 million (US$3.58 million) in the week ended Aug. 29, marking the first week of net buying since April. However, they have net sold Rs.46.9 billion worth of securities so far this year, Central Bank data showed.