Reuters: The rupee closed weaker and near its all-time low on Friday due to importer dollar demand and foreign outflows from equities and Government securities, dealers said.
Absence of dollar conversions by exporters and remittances also pushed the rupee down. Dealers said there were fears it could depreciate further, tracking weakness in emerging-market currencies globally.
The rupee touched its record low of 160.55 per dollar in early trade on Friday before closing at 160.45/55, compared with Thursday’s close of 160.35/50, and has declined 4.6% so far this year.
“There was importer dollar demand. Foreign banks bought dollars due to foreign exit from Government securities and the stock market,” a currency dealer said.
“There were some inflows from remittances, but they were not enough to meet the dollar demand. We expect the downward pressure to remain until emerging market currencies settle.”
Sri Lanka’s stock market has suffered a Rs. 829 million outflow in the last three sessions.
Exporters are holding on to dollars as they expect the local currency to decline further, the dealer said.
Most Asian currencies firmed on Friday as the Turkish lira recovered and investors scanned the horizon for cues from Sino-US negotiations.
But the Sri Lankan market is also concerned about the Indian rupee’s fall, as India is Sri Lanka’s biggest trading partner. India’s is the region’s worst performing currency this year, and hit a record low on Thursday as worries about a widening trade deficit soured sentiment.
Indian markets were closed for a holiday on Friday.
Central Bank Governor Indrajit Coomaraswamy told reporters this month that, after holding key monetary policy rates steady, several emerging-market currencies had declined more than the rupee, adding that “if we reduce rates, that would put further pressure on the exchange rate”.
Foreign investors sold government securities worth a net Rs. 818 million ($ 5.1 million) in the week ended 15 August, bringing the outflow so far this year to Rs. 3,991 billion, Central Bank data showed.