Sri Lankan rupee falls to record low ahead of rate decision
Dec 30, 2015 12:57 PM GMT+0530 | 0 Comment(s)
COLOMBO, Dec 30 (Reuters) - The Sri Lankan rupee fell 0.14 percent to a record low of 144.15 on Wednesday as speculation over further weakening weighed on the currency, ahead of the central bank's rate decision, with most analysts expecting a 25-basis-point rise.
The rupee traded at 144.10/30 per dollar at 0643 GMT, falling from Tuesday's close of 143.95/144.05. It surpassed the previous record low of 143.95 hit on Tuesday.
"No sensible exporter or investor will convert dollars when there are signs of central bank not raising the policy rates contrary to market expectations," a currency dealer said, asking not to be named.
"The rejection of all t-bond deals was a signal that it is not ready to allow the interest rates to go up. This means the entire pressure is going to be on the rupee and it is likely to depreciate further if there is no rate hike."
The central bank rejected all 33.06 billion rupees worth of bids at a t-bond auction on Tuesday after planning to raise 13 billion rupees through selling 46-month, 70-month, and 152-month t-bonds.
The monetary policy announcement is scheduled later in the day at 1400 GMT.
Six out of 11 economists polled by Reuters expect the central bank to raise interest rates by 25 basis points from record lows, to relieve pressure on the rupee.
The currency has been on a falling trend throughout the year after the central bank cut key policy rates to record lows to spur faltering growth and due to outflow of foreign investments in government securities.
Economists say the government's loose monetary and fiscal policies have contributed to the rupee's steep fall.
The currency has fallen 6.5 percent since the central bank allowed free float of the rupee on Sept. 4, and it is expected to weaken further in 2016 due to lower reserves and higher imports, currency dealers say.
It has fallen 9 percent so far in the year.
Sri Lanka's main stock index was down 0.02 percent by 0659 GMT.
Turnover stood at 175.1 million rupees ($1.22 million).