The Sri Lankan rupee traded steady at its lowest in more than two months on Friday amid downward pressure on importer dollar demand, dealers said, a day after the currency breached a key barrier that the central bank had been defending since early December.

 

The market expects slight depreciation in the local currency in the near future due to rising seasonal importer demand for dollars. The rupee is usually under pressure in March and early April due to seasonal imports ahead of the traditional new year in mid-April.

 

The spot rupee was traded at 130.95/131.00 per dollar at 0605 GMT, its lowest since Dec. 13, Reuters data showed.

 

“There is importer demand and pressure on the rupee. But nobody is going above 130.95,” which is a level seen desired by the central bank, a currency dealer said. “The central bank was not seen so far.”

 

On Thursday, the currency breached the 130.85 level, which dealers said the central bank has been defending for the past two months through buying and selling of dollars via two state banks.

 

The market and analysts had been concerned about the sustainability of the central bank’s policy measures to maintain a stable exchange rate, which is defended via selling and buying dollars, in a low-interest-rate regime.

 

Sri Lanka’s central bank on Monday kept policy rates steady at multi-year lows, with inflation expected to be contained throughout 2014 by “well-managed demand conditions and improved domestic supply”.

 

Currency dealers and traders said the central bank’s policies should work until the market sees a jump in private sector credit growth, which rose 7.5 percent year-on-year in December from 7.3 percent a month earlier.

 

The rupee has gained about 3.2 percent since it hit a record low of 135.20 on Aug. 28 last year. It lost 2.5 percent in 2013.

 

At 0527 GMT, Sri Lanka’s main stock index was down 0.25 percent, or 15.10 points, at 5,941.06, trading at its lowest level since Jan. 6, Reuters reports.