COLOMBO: Sri Lankan rupee forwards fell on Tuesday due to dollar demand by importers, but the central bank prevented further declines in the currency through moral suasion even as political uncertainty weighed ahead of the January 8 presidential polls, dealers said.
Eight loyalists from President Mahinda Rajapaksa's United People's Freedom Alliance, including Health Minister Mithripala Sirisena, have defected since Rajapaksa announced the snap poll last week. Sirisena has resigned to contest against Rajapaksa as the consensus candidate of a united opposition.
The four-day forwards, or spot-next-next, were actively traded, dealers said, touching an intraday low of 132.50 before paring some losses to close at 132.25/35. On Tuesday, it closed at 131.90/132.00.
The spot currency and three-day forwards, or spot-next, were not traded after the country's central bank capped the currency at predetermined levels to prevent volatility.
Central bank officials were not available for comment.
"The depreciation trend will remain at least until mid-December due to seasonal imports. Then, we expect the currency to recover due to inflows from remittances until March next year," a currency dealer said.
Exporters and banks were reluctant to sell dollars on expectation the currency would weaken further amid the fluid political situation, they added.
Overseas investors bought a net 457.8 million rupees worth government securities during the week ended November 19.
They sold a net 39.1 billion rupees ($298.5 million) in the eight weeks through November 19, data from the central bank showed.
Comments
Comments are closed for this article.