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S.Lanka rupee near life low on importer dlr demand

[Reuters, Monday, 30 March 2009 12:38 No Comment]

Sri Lanka’s rupee fell on Monday to near a life closing low on importer demand for

dollars amid speculation that an International Monetary Fund

(IMF) loan had compelled the central bank to float the rupee.


Shares edged down on Sri Lanka Telecom SLTL.CM shareswith investors waiting for directions from the IMF loan. The rupee <LKR=> closed weaker at 115.20/40 a dollar, fromFriday’s 114.85/115.05 to near all-time closing low. Itsprevious life closing low was 115.29/35 hit on Feb. 26.


It hit an all-time low of 115.75/95 on Feb. 27 before thecentral bank intervened to keep it steady.


"It’s an indication by the central bank that it is ready tofloat the rupee, before deciding the IMF loan," said a currencydealer. "There was demand for dollars from importers and aforeign bank for share-related transactions."


Traders said the $1.9 billion IMF loan, now beingnegotiated in Colombo, will likely mean the central bank can nolonger support the rupee artificially.


Central bank officials declined to comment, but havealready said they expect to allow more flexibility in theexchange rate once the loan is finalised.


The rupee has fallen 6.33 percent since Oct. 30, after thecentral bank allowed depreciation to preserve dollars andenhance exporter competitiveness. It is down 2 percent so farin 2009.


The Colombo All-Share index .CSE edged down 0.23 percentor 3.85 points to 1644.59.


"Investors are waiting for directions from the IMF loan, asthey see a floating exchange rate," said Hussain Gani,associate director at Asia Securities. "It’s a concern for themarket."


Analysts and trader expect the rupee to drop further, andsay that has encouraged foreign investors to pull out or tohold back on new investments until it settles.


Market heavyweight and Sri Lanka’s top fixed-line phoneoperator Sri Lanka Telecom SLTL.CM fell 2.22 percent to 33rupees, calculated on a weighted average, while topconglomerate John Keells Hodings JKH.CM closed flat at 64.50rupees.


Turnover was 284 million rupees, or about 60 percent oflast year’s daily volume of 464 million rupees.


The interbank lending rate or call money rate CLIBORedged up to 11.222 percent from Friday’s 11.209 percent.

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