The Sri Lankan rupee hit an all-time low on Monday due to importer dollar demand while moral suasion by the central bank prevented a further decline, dealers said. The rupee fell 0.35 percent to a record low of 142.00 per dollar before recovering slightly to end at 141.95. The previous all-time low of 141.50 was hit on Friday. "With the latest US jobs data, there is a high possibility of a Fed rate hike soon. So, the pressure on the rupee will continue," said a currency dealer asking not to be named.
"We thought the currency will gain against the US dollar with the inflow from the recent $1.5 billion bond. But it's weakening." Now that the US is closing in on full employment and inflation is likely to rise to target levels, the "next step" should be to start gradually increasing rates, a top US central banker said on Saturday. Another dealer said seasonal demand from importers could put further pressure on the local currency. In Sri Lanka, investors are waiting for more clarity on economic policies from the 2016 budget announcement, scheduled on November 20.
Dealers said they have not seen a significant gain in the currency after last month's $1.5 billion sovereign bond issue. Sri Lanka borrowed $1.5 billion via a 10-year sovereign bond sale on October 27 at a 6.85 percent yield, down from an initial guidance of about 7 percent. Commercial banks parked 110.07 billion rupees ($775.69 million) of surplus liquidity on Monday, using the central bank's deposit facility at 6 percent, official data showed. Both the stock and foreign exchange markets will be closed on Tuesday for Diwali, a Hindu religious holiday.
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