The Sri Lankan rupee pared early losses to end steady on Monday, as late exporter dollar sales offset the demand for the US currency, but pressure of a depreciation risk weighed on sentiment, dealers said. Rupee forwards were active with two-week forwards ended steady at 151.20/25 per dollar. Sri Lanka's stock and foreign exchange markets were closed on Friday for a Buddhist holiday.
"The market has factored in the gradual depreciation risk," said a currency dealer, requesting not to be named. "The market expects a 4 percent-5 percent depreciation this year and does not expect any sharp depreciation like in the past." The rupee fell 3.9 percent last year, following a 10 percent drop in 2015. The central bank has allowed the currency to gradually depreciate since mid-December, revising its spot reference rate multiple times.
Foreign investors net sold 31.38 billion rupees ($208.30 million) worth of government securities in the four weeks to February 8, according to the latest central bank data. Sri Lanka's central bank governor, Indrajit Coomaraswamy, said on Wednesday the bank was not planning to abruptly scrap its support for the rupee.
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