COLOMBO: Sri Lankan rupee forwards traded weaker on Tuesday on importer dollar demand while the market awaited clarity on the new government's economic policies and exporters remained on the sidelines amid fears of depreciation.
Four-day forwards were actively traded and stood at 133.30/133.50 per dollar by 0833 GMT, compared with Monday's close of 133.00/20.
"The basic problem is the central bank and the market do not agree on the price of the currency," a currency dealer said on condition of anonymity.
Already the 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 that the current foreign exchange policy does not need "any big changes".
"That will stabilise now. I don't think that will continue," Mahendran said, referring to the depreciation trend since 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 told Reuters on Monday that the new government had inherited a "scary" economic situation and was looking for cheaper debt while aiming to maintain a stable rupee.
Karunanayake will present a supplementary budget on Thursday, with the aim of fulfilling election pledges by President Maithripala Sirisena, including 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.
Market players, however, expect the rupee to depreciate to 135 in the near future, either due to a policy decision in the budget or if the central bank stops intervention and allows it to fall gradually.
The main stock index was up 0.74 percent or 54.07 points at 7,370.15 at 0851 GMT.
Analysts said investors were waiting for direction from the budget amid concerns over political uncertainty as President Sirisena said he would hold parliamentary elections after April 23.
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