Sri Lankan rupee forwards ended a tad weaker on Monday as dollar sales by a state-run bank for spot currency were limited only to select trades, putting pressure on the forwards, dealers said. A state bank has been selling ample dollars to keep the currency fall limited, but it restricted the dollar supply in late trade, dealers said.
Actively traded one-week forwards ended at 134.20/30 per dollar compared with Friday's close of 134.10/20, while three-month forwards, which have been actively trading over the last few weeks in the absence of spot, ended at 135.75/136.00 per dollar compared with Friday's close of 135.70/90. The spot rupee was steady at 133.90 per dollar as the state-run bank, through which the central bank usually directs the market, sold dollars at 133.90 for a fifth straight day, the dealers said.
"Forwards were tad weaker as the state bank limited the dollar sales to selected names in the later part of the day," a currency dealer said asking not to be named. The market expects the rupee to be stable as long as the central bank can offer dollars, but the stability will depend on the inflows the country is going to get. Finance Minister Ravi Karunanayake has said some international banks have come forward to offer ample dollar loans at between 3.25 percent and 3.75 percent.
On June 1, the spot currency started to trade after nearly six months after the island nation raised nearly $1 billion from bond sales. Sri Lanka on May 28 raised $650 million through an international sovereign bond sale and $388 million from development bonds. Dealers said exporters may start selling dollars as inflows from the dollar bond sale would help boost the rupee. The central bank, with effect from June 1, imposed a 5 percent penalty on exporters who hold dollars for more than 90 days, and a 2 percent monthly penalty thereafter, currency dealers said. Exporters have been reluctant to convert dollars into local currency as it is cheaper to manage costs with rupee loans in a lower interest rate environment.
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