Sri Lankan rupee ends slightly weaker in dull trade

Sri Lanka rupee vs US dollar

The Sri Lankan rupee edged lower for a third straight session on Wednesday in dull trade, as importer dollar demand outpaced inflows from inward remittances, dealers said.

The rupee ended at 158.60/75 per dollar, compared with Tuesday’s close of 158.50/60.

“It was a dull day but we saw some general import demand,” a currency dealer said. “The state banks were not seen selling dollars.”

Dealers said the downward pressure on currencies seen in emerging markets was due to the rise in Fed rates, the trade war between China and the United States, and the rise in oil prices.

The spot rupee hit an all-time low of 160.17 per dollar on June 20 and is down 3.4 percent so far this year.

A strengthening dollar since mid-April has increased the credit risk of several emerging markets, including Sri Lanka, due to currency depreciation, ratings agency Moody’s said on Wednesday.

Moody’s said a strong dollar would also lead to a drop in foreign exchange reserves of countries such as Argentina, Ghana, Mongolia, Pakistan, Sri Lanka, Turkey, and Zambia.

The downward pressure on rupee has shown signs of easing after the island nation received more than half a billion dollars from a Chinese port operator last month.

China Merchants Port Holdings made a $584 million payment as part of a $1.12 billion deal to operate the deep sea Hambantota port.

The International Monetary Fund (IMF) said last month Sri Lanka’s economy remains vulnerable to adverse shocks because of sizable public debt and large refinancing needs.

Foreign investors sold government securities worth a net 3.5 billion rupees ($22.11 million) in the week ended June 27, bringing the outflows so far this year to 29 billion rupees, central bank data showed. ($1 = 158.3000 Sri Lankan rupees)