The Sri Lankan rupee firmed on Tuesday as dollar sales by exporters offset demand for the US currency although depreciation concerns continued to weigh, dealers said. Rupee forwards were active, with two-week forwards closing at 151.15/25 per dollar, firmer from Monday's close of 151.20/25. "Some local banks are on the (dollar) selling side," said a currency dealer, requesting not to be named.
"We haven't seen foreigners selling and it may be also a reason for the easing pressure. But today, there was a dividend payment by a foreign bank." Foreign investors net sold 31.38 billion rupees ($208.30 million) worth of government securities in the four weeks to February 8, according to the latest central bank data.
The rupee fell 3.9 percent last year, following a 10 percent drop in 2015. The rupee has weakened 0.7 percent so far this year, under pressure due to rising imports and net selling of government securities by foreign investors. The central bank has said that defending the currency with foreign exchange reserves does not "seem sensible".
Dealers said the market has factored in a gradual depreciation risk for the rupee and it expects a 4-5 percent fall in the currency this year, unlike the sharp depreciation seen in the the past. The central bank has allowed the currency to gradually depreciate since mid-December, revising its spot reference rate multiple times.