COLOMBO: The Sri Lankan rupee ended weaker against the dollar as the central bank allowed a lower rate for the spot currency and limited forward premiums, aiming to curb depreciation pressure on the local currency.
Dealers said the central bank allowed the spot currency to trade at 132.80 from its previous day's rate of 132.20 and the central bank asked commercial banks to limit forward premiums by five cents per day, dealers said.
"But the spot was not trading at 132.80 because the effective spot rate is at 133.10/30 per dollar. So at the moment, two-week forwards are actively trading," a currency dealer said on condition of anonymity. "The central bank also limited forward premiums by five cents per day," he said adding that the new directive means four-day forwards could be traded only five cents more than three-day forwards.
Some dealers said the central bank warned it would take necessary action if commercial banks do not follow the new directives.
The central bank declined to comment on the changes it had made in the exchange rate.
Dealers said the policy uncertainty weighed on the currency as the new government has given some mixed signals on investments, discouraging exporter dollar sales amid continued importer demand.
They expect the pressure on the rupee to ease with some equity-related inflows.
Two-days above one-week forwards, which were actively traded, ended at 133.25/35 per dollar compared to Thursday's close of 133.45/50.
Two-week forwards ended at 133.45/55 per dollar compared to Thursday's close of 133.55/60. Dealers said exporters were reluctant to sell as they expected further depreciation in the currency in the short term, due to the widening trade balance and in line with softer global currencies.
The spot currency has not been trading, while forwards are facing downward pressure, dealers said. 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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