The Sri Lankan rupee traded weaker at near three-month low on Monday due to importer dollar demand in the absence of central bank intervention, dealers said, as the market is bracing for continued downward pressure ahead of the festival import demand.

The spot rupee was traded at 131.00/05 per dollar at 0631 GMT, its lowest since Dec. 3 and weaker from Friday’s close of 130.95/131.00, Reuters data showed.

“It seems the central bank is letting deals at 131.00. The central bank is not seen in the market,” a dealer said asking not to be named. Another dealer also confirmed the move.

Dealers said the central bank’s desired level seems to be 131.00 on Monday.

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

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

The rupee has also been under pressure due to foreign outflow from equities and government securities in the past two weeks, data showed.

Foreign investors had sold a net 2.32 billion rupees worth of government securities in the week ended Feb. 19, while they dumped 5.27 billion rupees in stocks in the 11 straight sessions through Friday as some offshore funds exited the bourse.

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.

Currency dealers and traders say 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 0640 GMT, Sri Lanka’s main stock index was down 0.52 percent, or 30.65 points, at 5,906.63, trading at its lowest level since Jan. 2 and heading for an eighth straight session of fall. - Reuters