The Sri Lankan rupee <LKR=> fell on Thursday to 111.00/20 per dollar, its lowest level in more than a year, another sign dealers said that the central bank is allowing the currency to gradually ease in value.
Dealers said there was no sign of state bank intervention to support the currency. The central bank is letting the currency fall gradually to ease pressure on foreign exchange reserves, they said.
The rupee has fallen close to 1 percent in three straight sessions. Dealers said the central bank has gradually lowered the level at which it supports the rupee.
"That is the market rate without our intervention," said Nandalal Weerasinghe, chief economist at the central bank.
Currency dealers said they had expected state banks to intervene and support the currency at 111.
"Spot is at 111.00/111.20, there was no intervention by the state names in the market," said a currency dealer on condition of anonymity.
"We expected the state banks to intervene at 111 levels but they were not seen."
Two foreign banks and three local banks confirmed that the rupee was trading at above 111 range. Some dealers expect the rupee to stay at 111.00 for the rest of the trading day.
Traders said that if the currency continues to slide at the current rate it will hit 113-114 by the end of the year.
On Oct. 30, the central bank let the rupee slip back from 108 per dollar, after defending that level since mid-September. The central bank then started supporting the currency at 110.
Currency dealers said the move was made to ease pressure on dwindling foreign currency reserves, which have fallen more than a quarter to around $2.6 billion since mid-September up to end-October. Economists estimate they fell to $1.9 billion by the end of November.
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