Sri Lankan rupee forwards slid for a third successive session on Thursday due to importer dollar demand, while dealers expect the local currency to remain under pressure in the near term due to growing economic uncertainty and rising debt levels. Finance Minister Ravi Karunanayaka said on Wednesday that the island nation borrowed over 25 percent more last year than in 2014, blaming the high cost of refinancing loans he said were raised by the previous government without parliamentary approval.
One-week rupee forwards, which act as a proxy for the spot currency, ended at 147.70/90 per dollar, down from Wednesday's close of 146.40/50. The spot did not trade below 143.90, seen as the central bank's desired level. "It is apparent that the central bank is losing its battle against stopping the rupee depreciation," a currency dealer said asking not to be named.
"Short-term borrowing has gone up. The debt roll-over cycle is getting short. Unless remittances and exports grow, frequent borrowing is going to increase and that could raise the rates of dollar borrowing in the future," the dealer said. Markets will be closed on Friday for a public holiday.