COLOMBO: Sri Lankan rupee forwards ended firmer on Wednesday, recovering from early losses as dollar sales by banks surpassed early importer demand for the greenback, currency dealers said.
Dealers said they expected the currency to depreciate further due to rising imports, selling of government securities by foreign investors and slowing dollar inflows.
One-week rupee forwards, which act as a proxy for spot, ended at 144.42/48 per dollar due to bank dollar sales after it reached 144.55/60 during the day. It had ended at 144.50/55 on Tuesday.
Rupee forwards have been active since Jan. 27 as there has been little trading in the spot currency, with banks reluctant to trade below the 144.00 level amid moral suasion by the central bank.
Central bank officials did not respond to calls seeking comment.
"There was importer demand in the morning. But in the latter part of the day, two banks started selling dollars. It is not clear weather it is exporter conversions or were they selling their positions," said a currency dealer asking not to be named.
Currency dealers said foreign investors exiting government securities was putting pressure on the currency.
Foreign investors sold 3.07 billion rupees ($21.33 million) worth government securities between Feb. 3 and 10, data from the central bank showed, taking the total offloading since Dec. 30 to 22.4 billion rupees.
The rupee is under pressure due to lack of dollar inflows, and a pick up in importer demand ahead of the festive season in April, dealers said.
Sri Lanka needs to pay more than $5 billion in foreign loans including interest payments in 2016, while its reserves were only around $6.3 billion at the end of January, according to central bank data.
Dealers said the central bank would not be able to hold the rupee at current levels without strong dollar inflows.
Commercial banks parked 17.6 billion rupees ($121.88 million) of surplus liquidity on Wednesday, using the central bank's deposit facility at 6 percent, official data showed.
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