COLOMBO: Sri Lankan rupee forwards fell for a fifth straight session on Tuesday due to dollar demand by importers and foreign investors selling bonds amid low liquidity in the greenback.
Dealers said importers were buying the greenback at record low levels.
The spot rupee, which has not been active since Jan. 27, did not trade. The central bank has fixed the spot trading price at 143.90 through moral suasion.
One-week rupee forwards, which act as a proxy for the spot currency, were traded as low as 149.10 per dollar and ended at 149.00/15, down from Monday's close of 148.10/30.
The one-week forwards have fallen around 3.4 percent since they started to trade after Jan. 27.
"We have seen some panic importer buying also, as importers expect the rupee to depreciate further," said a currency dealer asking not to be named.
The steep fall comes ahead of the central bank's key policy rates announcement later in the day.
The central bank is expected to raise its key interest rates by at least by 25 basis points on Tuesday, a Thomson Reuters poll showed, as it seeks to reduce downward pressure on the fragile local currency.
The rupee is under pressure due to foreign investors exiting from government securities amid speculation over further rate hike by the U.S. Federal Reserves and economic woes.
Rising debts, rating downgrades and revisions by rating agencies, slowing economic growth, widening fiscal deficit, looming balance of payments crisis, and changes in budget proposals have dented investor sentiment.
Finance Minister Ravi Karunanayaka said last week that Sri Lanka borrowed over 25 percent more last year than in 2014, blaming the high cost of refinancing loans raised by the previous government without parliamentary approval.
Analysts said short-term borrowing has gone up and the debt roll-over cycle is getting shorter. Borrowings are expected to increase and that could raise dollar borrowing rates in future unless remittances and exports grow.
Foreign investors sold 17.58 billion rupees worth of government securities in the week ended March 23, data from the central bank showed, taking the total offloaded since Dec. 30 to 83.7 billion rupees ($570.16 million).
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