Sri Lankan rupee one-week forwards ended firmer on Thursday due to dollar selling by exporters who were expecting further strengthening of the currency after a state-run bank sold the US currency in early trade, dealers said. Importers were reluctant to buy dollars, expecting the currency to strengthen further on the state-run bank's intervention, dealers said.
One-week dollar/rupee forwards, which have been acting as a proxy for the spot rupee in the absence of trade in three-day forwards, ended at 147.10/30 per dollar, higher than Wednesday's close of 147.40/70. "Rupee ended firmer as importers side-stepped expecting central bank to strengthen rupee further," said a currency dealer asking not to be named.
"We have seen some exporter conversions also." The central bank usually directs the market via two state-run banks, but on Thursday, it was not clear if the bank had sold dollars on behalf of the apex bank. Dealers said the market was perplexed by the central bank's intervention in both spot rupee and forwards at a time when the rupee was facing downward pressure. Central bank officials were not available for comment.
Moody's Investors Service on Monday changed the country's outlook to negative from stable, citing further weakening in some fiscal metrics in an environment of subdued GDP growth, which could lead to renewed balance of payments pressure. The central bank raised the spot rupee's peg to 145.25 per dollar from 144.50. The spot rupee was not actively traded for an eighth straight session on Thursday, dealers said.