The Sri Lankan rupee ended weaker in a shortened session on Friday on dollar demand from a foreign bank for dividend payment and as foreign investors sold government securities amid concerns of further depreciation in the rupee, dealers said. Rupee forwards were active, with one-month forwards ending at 152.70/80 per dollar, weaker from Thursday's close of 152.00/15. Two-week forwards ended at 151.80/152.00 per dollar, down from Thursday's close of 151.60/70.
"The currency is under pressure with the finance minister's comment that the rupee needs to be controlled and the delay of Chinese projects," said a currency dealer, requesting not to be named. Sri Lanka could face balance-of-payments pressure due to foreign outflows from government securities, a government document showed on Thursday, even as the island-nation is in the process of raising up to $2.5 billion from foreign borrowing. Foreign investors have net sold 31.38 billion rupees ($208.30 million) worth of government securities in the four weeks to February 8, according to latest central bank data. Finance Minister Ravi Karunanayake on Tuesday said that protecting a fragile rupee was more important than controlling interest rates as the local currency tended not to rebound after depreciating.
Reuters reported that China will delay a planned $1.1 billion investment in a port on its modern-day "Silk Road" until Sri Lanka clears legal and political obstacles to a related project, sources familiar with the talks said, piling more pressure on the island-nation. Central Bank Governor Indrajit Coomaraswamy said last week the bank was not planning to abruptly stop supporting the rupee. The rupee has weakened 0.84 percent so far this year, under pressure from rising imports and net selling of government securities by foreign investors. It fell 3.9 percent last year, following a 10 percent drop in 2015.
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