COLOMBO: The Sri Lankan rupee closed weaker on Monday on importer dollar demand, as the market braced for declines in the local currency with the central bank raising the spot reference rate following a hike in US interest rates, dealers said.
The US Federal Reserve raised interest rate by 25 basis points on Wednesday and signalled a faster pace of increases in 2017 as central bankers adapted to the incoming Donald Trump administration's promises of tax cuts, spending and deregulation. Rupee forwards were active with spot-next forwards closing at 149.60/80 per dollar, compared with Friday's close of 149.40/70.
"There was importer dollar demand today, while we did not see usual year-end exporter sales," said a currency dealer, asking not to be named. On Thursday, the central bank increased the spot reference rate by 30 cents to 149.10, a day after raising it by 10 cents. The spot rupee was hardly traded on Monday.
The dollar and US bond yields fell while Asian shares hit a four-week low, as investors cashed in on some of their recent bets that the anticipated fiscal boost from the incoming Trump administration will support riskier assets.
The rupee usually rises in December ahead of Christmas and New Year due to remittances from expatriates, but dealers said the currency was expected to face pressure this time due to higher dollar demand from importers following the Fed rate hike. Analysts expect some capital outflow as the immediate reaction to the Fed rate hike and are also concerned over the government's foreign borrowing cost rising in the short term. Foreign investors net sold 52.3 billion rupees ($350.77 million) of government securities in the eight weeks ended Dec. 14.
Comments
Comments are closed for this article.