Rupee forwards decline; more fall seen on Fitch downgrade

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.

Fitch on Monday downgraded Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) of Lanka 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 countrys borrowing.

“Even though the finance minister said there will not 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 borrowing cost in the international markets, adding to the pressure on the rupee.

One-week rupee forwards, which act as a proxy for the spot currency, ended at 144.85/95 per dollar, slightly weaker from close of 144.80/90 of Monday.

(Source: Reuters)