The Sri Lankan rupee recovered from early falls to close little changed on Monday with dollar selling by a state bank offseting early importer demand for the US currency, traders said. However, the worst floods in 14 years that have left 177 people dead weighed on the currency, they added. Authorities warned of more rains and landslides on Monday as a cyclone formed in the Bay of Bengal.
The floods would have an adverse impact on agricultural exports, putting pressure on the rupee, said a currency dealer asking not to be named. "Floods could also pressure the overall GDP and government budget deficit with high infrastructure spending," he said. Rupee forwards were active on Monday, with spot-next forwards closing at 152.80/95 per dollar, compared with Friday's close of 152.85/95.
A state bank sold dollars at 152.90 per dollar, dealers said. Dealers said the rupee has been under pressure after the central bank governor on May 18 said the bank would allow gradual depreciation of the currency. The spot rupee did not trade on Monday. The central bank fixed the spot rupee reference rate at 152.50 on May 5. Foreign investors bought a net 14.6 billion rupees ($95.61 million) worth of government securities in the two weeks ended May 24. They have sold net 42.1 billion rupees worth securities so far this year.
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