Sri Lankan rupee forwards edge up on exporter, bank dollar conversions
COLOMBO, June 9 (Reuters) – Sri Lankan rupee forwards edged up on Thursday as dollar conversions by exporters and banks surpassed importer demand for the greenback, while the spot currency was actively traded for the second straight day in nearly five months, dealers said.
The dollar/rupee forwards, known as spot next, were at 145.85/95 per dollar at 0628 GMT, compared with Wednesday’s close of 145.95/146.05.
The spot next, which acted as a proxy for the spot currency, indicates the exchange rate for the day following conventional spot settlement, which is five days ahead for Thursday’s trade.
Dealers said the spot currency, which started active trading on Wednesday for the first time since January 18, traded for the second straight day on Thursday.
The spot rupee was at 145.75/90 per dollar compared with Wednesday’s close of 145.75/146.05.
"The spot is trading, but it is not allowed to trade below 145.75. The spot next is trading tad firmer on some selling in the market," a currency dealer said.
Sri Lanka’s Central Bank had fixed the spot rate at 143.90 per dollar until May 2, and the spot rupee reference rate has been pegged at 145.75.
Two state-run banks, through which the Central Bank usually directs the market, sometimes sell dollars to curb falls in the rupee.
Central Bank officials were not available for comment on whether it had intervened.
Dealers, however, expect the local currency to strengthen further, after the International Monetary Fund’s (IMF) executive board approved a three-year $1.5 billion loan to support the country’s economic reforms agenda.
The government is also to raise up to $1.5 billion via sovereign bonds and four international banks have been appointed as the lead manager.
Prime minister Ranil Wickremesinghe told the parliament participating in a no-confidence motion against the finance minister that the government will take measures to abolish the exchange control act and will introduce the capital gain tax soon, without giving a timeframe.
"Abolishing exchange control is something that is needed and it will help a flexible exchange rate. But the capital gain tax will be a bit more negative, especially in the stock market," said Shiran Fernando, an analyst at Colombo-based Frontier Research.
The Sri Lankan stock index was up 0.1 percent at 6,532.42 as of 0634 GMT on a turnover of Rs138.8 million ($953,296.70).