Sri Lankan rupee firmer after IMF loan

Sri Lanka Rupee vs US Dollar

The Sri Lankan rupee ended firmer on Monday as exporter dollar sales surpassed early greenback demand from importers on worries capital outflows would increase as incoming U.S. President Donald Trump’s policies were seen guiding U.S. rates higher and strengthening the dollar.

Foreign investors might pull out of emerging markets, including Sri Lanka, if the Fed raises interest rates next month, dealers said.

The International Monetary Fund (IMF) released a second tranche of loans worth $162.6 million and said Sri Lanka’s macroeconomic and financial conditions have begun to stabilise.

Pressure on the rupee is expected to ease on the IMF loan, with investors waiting to see what action the central bank would take after the loan money flows in, dealers said.

Rupee forwards were active on Monday. The spot-next hit a low of 148.85 per dollar in early trade due to importer dollar demand but ended at 148.55/65, compared with Friday’s close of 148.75/85.

“We have seen some exporter conversions in the latter part of the day,” said a currency dealer requesting anonymity.

“Some exporters must have taken IMF as a positive development.”

The central bank on Friday revised the spot rupee reference rate to 147.95 per dollar from 147.75.

The spot rupee was hardly traded on Monday, but was quoted at 148.20/149.00.

The rupee currency has been under pressure as exporters were reluctant to sell dollars due to global concerns and uncertainties in the Sri Lankan market following the national budget, which has proposed a revision in corporate and withholding taxes.

The rupee is also under pressure as foreign investors exit government securities due to new taxes proposed in the budget, dealers said.

Foreign investors net sold government securities worth 37.12 billion rupees ($250.81 million) in the five weeks ended Nov. 16, data from the central bank showed.