COLOMBO: Sri Lankan rupee forwards were firmer on Monday as the spot currency started to trade after the island nation raised nearly $1 billion from bond sales in the previous week, with the local currency seen holding steady amid further expected inflows.
Sri Lanka raised $650 million on Thursday by selling a sovereign bond at a yield of 6.125 percent and $388 million from development bonds.
The spot rupee started trading as a state bank, through which the central bank usually directs the market, sold dollars at 133.90 per dollar, dealers said.
"As a result, most of the forwards strengthened," a dealer said asking not to be named. "If the expected inflows come in then the pressure on the rupee might ease."
Three-month forwards, which were actively traded for the last few weeks in the absence of spot trading, were at 136.50, firmer from Friday's close of 137.80/90. The three-month forwards had gained on Thursday for the first time since May 15.
Finance Minister Ravi Karunanayake on Friday said the country will see further inflow from some international banks, while Central Bank Governor Arjuna Mahendran said the depreciation pressure was due to a stronger dollar. Dealers said exporters may start selling dollars as inflows from the dollar bond would help boost the rupee.
The central bank, with effect from Monday, imposed a 5 percent penalty on exporters who hold their dollars for more than 90 days, and a monthly 2 percent thereafter, currency dealers said.
Exporters have been holding dollars without converting them as it has become cheaper for them to manage costs locally with rupee loans in a lower interest rate environment.
The central bank has allowed the spot to fall 0.75 percent, or by 1 rupee, since April 30 to account for broad gains in the dollar and rising credit demand in a low rate environment.
In the stock market, the benchmark index was 0.26 percent down at 7,201.68 as of 0906 GMT. Turnover stood at 730.8 million rupees ($5.46 million).
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