Rupee forwards weaker on imports, foreign bond sales

REUTERS - Sri Lankan rupee forwards traded weaker yesterday on dollar demand from importers and as foreign investors sold government securities, dealers said. Fitch’s downgrade of Sri Lanka’s sovereign rating also weighed on the currency, said some dealers, adding the rupee would face further downward pressure due to seasonal importer demand.

Finance Minister Ravi Karunanayake and Central Bank Governor Arjuna Mahendran, however, said the downgrade will not impact the country’s borrowing.

“The rupee is weaker on importer (dollar) demand and foreigners selling government bonds,” said a currency dealer asking not to be named. The downgrade will be of concern to international investors and market players, analysts said, adding it would push up the cost of government borrowings in the international market, putting pressure on the rupee. One-week rupee forwards, which act as a proxy for the spot currency, traded at 145.05/15 per dollar at 0507 GMT weaker from Thursday’s close of 144.90/145.00. The spot currency did not trade below 143.90, seen as the Central Bank’s desired level. The spot rupee hit a record low of 144.65 when it resumed trading for the first time since Jan. 27 on Friday.

ONE-WEEK RUPEE FORWARDS, WHICH ACT AS A PROXY FOR THE SPOT CURRENCY, TRADED AT 145.05/15 PER DOLLAR AT 0507 GMT WEAKER FROM THURSDAY’S CLOSE OF 144.90/145.00

It did not trade for the past three sessions through Wednesday. Foreign investors sold Rs.2.5 billion ($17.4 million) worth of government securities in the week ended Feb. 24, data from the Central Bank showed, taking the total offloaded since Dec. 30 to Rs.34.95 billion. Sri Lanka’s main stock index was 0.07 percent weaker at 6,056.76 as of 0540 GMT. Turnover stood at Rs. 196.4 million ($1.4 million). ($1 = 144.5000 Sri Lankan rupees)