The Sri Lankan rupee traded steady on Wednesday, hovering near three-month lows for a third straight session, as light dollar demand from importers was offset by greenback sales by a state bank.

 

The market expects downward pressure to continue ahead of festival import demand in April, dealers said.

 

The spot rupee was traded at 131.05/10 per dollar at 0712 GMT, its lowest since Dec. 3, and a little changed from Tuesday’s close of 131.05/08.

 

Dealers said the spot rupee was capped at 131.05 by the central bank through two state banks and moral suasion.

 

“Since there is moral suasion, the rupee spot hardly traded above 131.05. There were clear indications from the central bank that they do not want the rupee to go above that level,” a dealer said on condition of anonymity.

 

Dealers say the gradual depreciation would not go out of proportion as the central bank has the muscle to defend the rupee with strong reserves.

 

Dealers expect the rupee to gradually depreciate to 131.60 by the end of the first quarter due to seasonal imports.

 

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 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 5.41 billion rupees in stocks in the 13 straight sessions through Tuesday.

 

The rupee has gained about 3.17 percent since it hit a record low of 135.20 on Aug. 28 last year. It lost 2.5 percent in 2013.

 

At 0716 GMT, Sri Lanka’s main stock index was up 0.73 percent, or 42.53 points, at 5,878.45, gaining from a near 10-week low hit on Tuesday and heading to snap a nine straight session losing streak, Reuters reports.