The Sri Lankan rupee fell on Tuesday, in line with declines in emerging market currencies on investor fears higher US interest rates under incoming President Donald Trump would spark capital outflows from those markets, while importer dollar demand also weighed on the market.
The weakness in the rupee also followed last week's budget proposals to revise corporate and withholding taxes to boost revenue and cut the 2017 fiscal deficit to 4.6 percent of gross domestic product from this year's 5.4 percent. Dealers said a high-tax regime would put pressure on the rupee.
Rupee forwards were active, with spot-next forwards ending at 148.50/55 per dollar, compared with Friday's close of 148.00/10. Markets were closed on Monday for a public holiday. One-week forwards ended at 148.60/75 per dollar, compared with Friday's close of 148.20/30. "Importer demand was there after the long weekend," said a currency dealer requesting anonymity. "Exporters are reluctant to sell (dollars) due to global uncertainty and local uncertainty following the budget."
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