Sentiment on the Sri Lankan rupee improved on Friday, as reflected in the forwards market, after the country signed a $1.5 billion, three-year loan agreement with the International Monetary Fund.
Traders said banks sold dollars on expectation the local currency would further appreciate.
The spot rupee, which has barely seen any trading since Jan. 27, was not actively traded on Friday as well, but the movement in short-term dollar/rupee forwards indicated the rupee was being bid up.
Before the market opened, the IMF said it had reached a staff-level agreement with Sri Lankan authorities for a $1.5 billion, three-year loan to help the island nation avert a balance of payments crisis.
“Banks are selling dollars. With the IMF announcement, investors hope foreigners will buy more bonds and there are some remittance conversions expecting rupee to strengthen,” said a local bank currency dealer, requesting not to be named.