COLOMBO: The Sri Lankan rupee edged lower on Thursday on persistent worries of capital outflows as incoming President Donald Trump's policies are seen aiding higher U.S. interest rates and a strong dollar, but the rupee's fall was capped by a state bank's dollar sales.
The U.S. dollar index, which measures the greenback's strength against a basket of major currencies, touched a near 14-year high on Wednesday.
Rupee forwards were active, with spot-next forwards trading at 148.80/90 per dollar at 0555 GMT, compared with Wednesday's close of 148.60/80.
One-week forwards were at 148.85/149.00 per dollar, compared with previous close of 148.80/149.00.
Exporters were reluctant to sell dollars due to global concerns and uncertainties within the Sri Lankan market following the national budget, dealers said.
Dealers also said foreign investors might pull out from emerging markets, including Sri Lanka, if the Fed is on course to raise interest rates next month.
"There is dollar demand, but not many exporter conversions," said a currency dealer requesting anonymity, adding the market saw state-bank intervention on Thursday.
In addition to the global selloff, the rupee is also pressured by foreign investors exiting government securities due to new taxes proposed in the budget, dealers said.
The national budget has proposed to revise corporate and withholding taxes to boost revenue and cut the 2017 fiscal deficit.
Foreign investors net sold 34.2 billion rupees ($231.08 million) worth of government securities in the four weeks ended Nov. 9, data from the central bank showed.
Sri Lankan shares were marginally weaker, with the benchmark Colombo stock index down 0.04 percent at 6,346.66 as of 0642 GMT. Turnover was 86.3 million rupees ($583,108.11).
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