Sri Lanka rupee falls as state bank raises dollar peg

COLOMBO, Aug 17 (Reuters) – The Sri Lankan rupee fell on Monday, declining for a third session in four, as a state-run bank raised the currency’s peg against the dollar by 10 cents to allow the exchange rate to depreciate to 134.00, dealers said.

They expect the central bank, which has so far this year directed the market through the state-run bank, to let the currency remain weaker after Monday’s parliament elections due to importer dollar demand and global trend.

Sri Lankans went to the polls on Monday to elect a new parliament in what amounts to a referendum on ex-president Mahinda Rajapaksa’s comeback bid, with the reformist alliance that swept him from power seeking a stronger mandate.

Analysts said the rupee may fall to 137 levels in the short term if the central bank allows it to depreciate, in line with the weakening seen in other global currencies against the dollar.

Dealers said there was heavy importer dollar demand with some booking forwards. Exporters also expect the rupee to depreciate further, they added.

"There was huge importer demand and no exporter (dollar) sales," a currency dealer said, asking not to be named.

Central bank officials were not immediately available for comment.

The currency has fallen 0.37 percent since Aug. 5 as the state-owned bank raised the currency’s peg against the dollar by 50 cents on four occasions, allowing the exchange rate to fall.

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