Sri Lankan rupee falls; IMF loan caps losses

Nov 21, 2016 (Reuters) – The Sri Lankan rupee was trading slightly weaker on Monday on worries capital outflows would increase as incoming U.S. President Donald Trump's policies were seen guiding U.S. interest rates higher and strengthening the dollar. Foreign investors might pull out of emerging markets, including Sri Lanka, if the Fed raises interest rates next month, dealers said. The International Monetary Fund (IMF) released a second tranche of loans worth $162.6 million and said Sri Lanka's macroeconomic and financial conditions have begun to stabilise.

Pressure on the rupee is expected to ease on the IMF loan, with investors waiting to see what action the central bank would take after the loan money flows in, dealers said.

Rupee forwards were active on Monday, with the spot-next trading at 148.80/90 per dollar at 0559 GMT, compared with Friday's close of 148.75/85. The central bank on Friday revised the spot rupee reference rate to 147.95 per dollar from 147.75. The spot rupee was hardly traded on Monday, but was quoted at 148.20/149.00. "There is not much activity today, lots of investors are waiting to see what is happening with the IMF money," said a currency dealer requesting anonymity. The rupee currency has been under pressure as exporters were reluctant to sell dollars due to global concerns and uncertainties in the Sri Lankan market following the national budget, which has proposed a revision in corporate and withholding taxes. The rupee is also under pressure as foreign investors exit government securities due to the new taxes proposed in the budget, dealers said. Foreign investors net sold government securities worth 37.

12 billion rupees ($250.81 million) in the five weeks ended Nov. 16, data from the central bank showed. Sri Lankan shares were marginally weaker, with the benchmark Colombo stock index down 0.36 percent at 6,303.07 as of 0603 GMT. Turnover was 163.8 million rupees ($1.11 million).