Rupee slips to near 1-year low on foreign bond sales

REUTERS - The Sri Lankan rupee fell to a fresh 11-1/2-month low against the dollar yesterday on renewed selling of government bonds by foreign investors, dealers said.

The customary importer demand for dollars were also cited by dealers asafactorkeepingtherupeeunderthe cosh.

They said banks had to trade in the short-term forward market in the absence of an active spot-dollar market as the Central Bank is discouraging state banks from trading the rupee beyond132tothedollar.

The spot rupee fell to 132.45 per dollar in early trade, Thomson Reuters data showed, its lowest since Sept.14, mainly due to renewed selling by foreignersof governmentbonds.

The bond sales picked up after Wednesday’s release of the U.S. Federal Reserve minutes of its July meeting suggested it may still trim its massive stimulus next month, which has seen U.S. Treasury yields rising sharply.

The spot next or one-day forward traded at 132.60/70 per dollar at 0603 GMT, compared with Thursday’s close of 132.15/30. Dealers expect the local currency to depreciate further unless the Central Bank intervenes to curb the dollar’s rise.

“The rupee will depreciate further with the gradual exit of foreign bond holders in line with the rise in U.S. Treasury yields,” said a currency dealer.

On Monday, the Central Bank said it will intervene when there is excess volatility in the market. Sri Lanka’s main stock index traded 0.3 percent, or 15.62 points, down at 6,070.26 at 0607 GMT.