COLOMBO: Sri Lankan rupee forwards ended weaker on Tuesday on importer dollar demand even as the central bank capped the fall, while exporters awaited direction from the supplementary budget later this week, dealers said.
Fears of possible depreciation kept exporters away from the market, which resulted in the fall of the currency, leading the central bank to cap the four-day forward at 133.00, which forced dealers to trade one-week forwards, dealers said.
One-week forwards closed at 133.45/55 per dollar, weaker from Monday's close of 133.20/40.
Four-day forwards closed at 133.00/133.50 per dollar, weaker from Monday's close of 133.00/133.20. They fell 0.45 percent last week, market data showed.
"No dollars are coming into the market as exporters are waiting, expecting more depreciation in the currency," a dealer said.
Another dealer said concerns over the central bank and the market not agreeing on the price of the currency have weighed on sentiment.
Dealers said the market is expecting depreciation in the short term with the widening trade balance and in line with global currencies.
The spot currency has not been trading, while forwards have been trading with downward pressure, dealers said.
The new central bank governor, Arjuna Mahendran, told Reuters that the current foreign exchange policy does not need "any big changes".
"That will stabilise now. I don't think that will continue," Mahendran said, referring to the depreciation trend since August.
Some dealers said exporters are waiting for clarity from the new government's economic policy as they are confused after the central bank governor kept rates steady on Tuesday, saying the economy was doing well, but the finance minister criticised the previous government's economic management.,
Finance Minister Ravi Karunanayake will present a supplementary budget on Thursday, aiming to fulfil election pledges by President Maithripala Sirisena that included pay hikes for the state sector and price reductions on essential goods.
The market had been expecting a flexible exchange rate with more foreign grants under the new government as opposed to the controlled exchange rate regime earlier.
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