Sri Lankan rupee forwards ended a tad weaker on Friday on importer dollar demand, while the market waited for direction from an interim budget next week, dealers said. Dealers said fears of possible depreciation also kept exporters away from the market. Four-day forwards ended at 132.95/133.05 per dollar, compared with Thursday's close of 132.90/133.00. They have fallen 0.45 percent in the week, market data showed.
"It is hard to predict the movement of the rupee as nobody knows what the new government's policies are," a dealer said. "With next week's budget, there could be some clear direction." President Maithripala Sirisena's new government is scheduled to announce an interim budget on January 29. The recent depreciation in the Japanese Yen and the Euro and lower interest rates have encouraged more imports, dealers said.
Market players expect the rupee to depreciate to 135 in the near future, either due to a policy decision in the budget or if the central bank allows it to fall gradually by stopping intervention. Sirisena, who announced an interim cabinet on January 12, said he would carry out reforms to fight corruption in the 100 days to a parliamentary election. The market is expecting a flexible exchange rate with more foreign grants under the new government as opposed to the controlled exchange rate regime earlier. The spot currency was not traded on Friday.
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