COLOMBO: Sri Lankan rupee forwards ended weaker on Wednesday on importer dollar demand but the central bank capped the fall, as exporters awaited direction from a supplementary budget, dealers said.
Fears of depreciation kept exporters away from the market, resulting in the currency's fall and leading the central bank to cap four-day forwards at 133.00, dealers said.
That forced dealers to trade one-week forwards.
One-week forwards closed at 133.50/60 per dollar compared with Tuesday's close of 133.45/55.
Four-day forwards closed at 133.00/40 per dollar, little changed from Tuesday's close of 133.00/133.50. They fell 0.45 percent last week, market data showed.
"Everybody is waiting to see the outcome of the budget," a dealer said.
Dealers said exporters are not selling as they expect further depreciation in the currency in the short term, with the widening trade balance and in line with global currencies.
Spot currency has not been trading, while forwards have been trading with downward pressure, dealers said.
The new central bank governor, Arjuna Mahendran, told Reuters on Tuesday that the current foreign exchange policy does not need "any big changes" and expects the currency to stabilise, ending the depreciation trend that started in August.
Some dealers said exporters are waiting for clarity from the new government's economic policy as they are confused after the central bank governor kept rates steady on Tuesday, saying the economy was doing well, but the finance minister criticised the previous government's economic management.,
Finance Minister Ravi Karunanayake will present the supplementary budget on Thursday, aiming to fulfil election pledges by President Maithripala Sirisena that included pay hikes for the state sector and price reductions on essential goods.
The market had been expecting a flexible exchange rate with more foreign grants under the new government as opposed to the controlled exchange rate regime earlier.
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