Sri Lankan rupee forwards ended slightly weaker on Tuesday on importer dollar demand, while dealers expected the currency to remain under pressure due to seasonal importer demand and after a downgrade by Fitch Ratings. One-week rupee forwards, which act as a proxy for the spot currency, ended at 144.85/95 per dollar, slightly weaker from Monday's close of 144.80/90.
The spot rupee, which hit a record low of 144.65 per dollar when it resumed trading on Friday, for the first time since January 27, did not trade on Tuesday for the second straight session. It ended at 144.40/70 on Friday. Fitch on Monday downgraded Sri Lanka's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to B-plus from BB-minus on increasing refinancing risks, significant debt maturities, and weaker public finances.
Both Finance Minister Ravi Karunanayake and Central Bank Governor Arjuna Mahendran, however, said the downgrading will not have any impact on the country's borrowing. "Even though the finance minister said there won't be any impact, the Fitch downgrading has a negative impact. It is yet to filter into the market," said a currency dealer asking not to be named.
Analysts said the downgrade is a concern for international investors and market players and will push the government's borrowing cost in the international markets, adding to the pressure on the rupee. Seasonal import demand is picking up ahead of the local New Year season starting in April, dealers said.
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