COLOMBO: Sri Lankan rupee forwards ended weaker on Thursday due to importer dollar demand despite moral suasion by the central bank, while exporters awaited direction from a supplementary budget, dealers said.
Currency dealers said the rupee may depreciate because of an expected increase in consumption after a raft of tax reductions on key commodities in the budget.
Fears of depreciation kept exporters away from the market, resulting in the currency's fall and leading the central bank to cap four-day forwards at 133.00 and one-week forwards at 133.50, dealers said.
One-month forwards ended at 134.00/10 per dollar compared with Wednesday's close of 133.90/80.
One-week forwards ended at 133.50/60 per dollar, unchanged from Wednesday's close of 133.50/60, while four-day also ended unchanged at 133.00/133.40 per dollar.
"The currency will be under pressure with the increase of disposable income from the budget," said a dealer.
The new government on Thursday imposed taxes on cash-rich firms to pay for populist policies and tax reduction on key commodities in a bid to woo voters as it faces a parliamentary election in the second quarter.
Dealers said exporters were not selling as they expected further depreciation in the currency in the short term, with the widening trade balance and in line with global currencies.
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 on Tuesday the current foreign exchange policy does not need "any big changes" and expects the currency to stabilise, ending the depreciation trend that started in August.
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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