COLOMBO: The Sri Lankan rupee closed at a three-week low on Wednesday due to importer dollar demand, while dealers expect the rupee to face downward pressure if the United States investigates claims regarding import of Iranian crude via third parties.
The rupee ended weaker at 130.34/38 per dollar, its lowest since June 3, from Tuesday's close of 130.32/35.
"Importer dollar demand has picked up," a currency dealer said asking not to be named.
Dealers said the currency would trade in a range of 130.40 to 130.50 due to expected importer dollar demand, but it may gain due to inflows.
Currency dealers said it was too early to speculate about the implications of the country breaching U.S. sanctions.
The Sri Lankan government spokesman said on Thursday the country had been buying Iranian crude from various countries via third parties. The country's foreign ministry has rejected the spokesman's claim.
The U.S. State Department has said in the event of Sri Lanka breaching the sanctions, the United States would have to consider a response consistent with its legal obligations and "any violations would immediately make the company or institution vulnerable to sanctions".
"But nothing has happened of that nature so far and it has been a relief for the market," said a currency dealer with a Colombo-based foreign bank.
Sri Lanka's oil import bill could rise if it has to buy more refined oil, dealers said.
Dealers expect the currency to be stable if there is no pressure from the oil import bills due to rising exports and a fall in imports and private-sector credit growth.
The rupee has been on a rising trend since late February due to strong inflows from remittances in the absence of higher imports and private sector credit demand for the currency, dealers said.
The central bank has absorbed around $550 million from the domestic foreign exchange market this year through June 17 to prevent sharp volatility and appreciation.
Comments
Comments are closed for this article.