The Sri Lankan rupee closed weaker on Tuesday on dollar buying by banks and importers, with dealers saying the rupee was expected to fall further unless the country's central bank stepped in to raise interest rates. The dollar bounced back towards 14-year highs on Tuesday, boosted by upbeat comments by US Federal Reserve Chair Janet Yellen that kept alive market expectations for a faster pace of US interest rate hikes next year than had previously been forecast.
At home, rupee forwards were active with spot-next forwards closing at 149.85/95 per dollar, compared with Monday's close of 149.60/80. "There is some element of uncertainty after a stock deal was reversed. Some banks are collecting dollars. Sentiment has to be built up for inflows," a currency dealer said, asking not to be named. The spot-next was quoted at 149.90/150.10 before a bank offered dollars at 149.90 to ease pressure on the rupee, dealers said. Foreign investors have net sold 52.3 billion rupees ($350.77 million) of government securities in the eight weeks.