Sri Lankan rupee hits record low on importer dollar demand

The Sri Lankan rupee fell 0.11 percent on Tuesday to an all-time low due to importer demand for dollars, while exporters held on to the greenback on expectations of further depreciation.

The rupee hit an life-time low of 141.00, surpassing its previous low of 140.98 hit on Sept. 17.

Dealers said the currency recovered slightly as a state bank, through which the central bank usually directs the market, sold dollars at 140.98 per dollar to limit the fall.

The spot rupee ended at 140.95/141.05 per dollar, weaker from Monday’s close of 140.85/90. It has fallen 4.4 percent since the central bank effectively floated it on Sept. 4.

“It looks like the central bank’s desired level is 141.00,” said a currency dealer, asking not to be named.

“Exporters were reluctant and waiting, they expect the currency to depreciate further.”

Officials from the central bank were not immediately available for comment.

The market expects the currency to fall further in the short term if the central bank fails to tighten interest rates or the country does not see strong inflows soon, some dealers said.

The rupee float has won a thumbs-up from rating agencies and economists, but more reforms will be needed to support the currency and conserve the central bank’s modest reserves.

In a bid to curb dollar outflows on vehicle purchases, the central bank on Sept. 15 imposed a 70 percent limit on loans and advances for vehicles, a move seen aimed at easing demand for credit and stemming dollar outflows. (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)

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