The Sri Lankan rupee edged lower on Friday due to importer dollar demand despite state banks selling the greenback at 130.65 levels, while stocks gained after key policy rates were kept steady at multi-year lows.
Central Bank Governor Ajith Nivard Cabraal said on Wednesday that the rupee would be stable throughout this year due to rise in inflows through exports and remittances into the island nation.
The spot rupee was at 130.65/68 per dollar at 0547 GMT, a tad weaker than Thursday’s close of 130.63/68.
Some dealers said the three-day forward, or spot-next, traded actively as they did not want to trade above 130.65 rupees a dollar, which is seen as the central bank’s desired level for the local currency.
“Seasonal import demand is coming up slowly that may be the reason the central bank raised its defending level from 130.60 to 130.65. They might even raise up to 130.70 depending on demand,” said a currency dealer on condition of anonymity.
Contrary to market expectations, the local currency has been gaining ahead of the traditional New Year in April. Usually, the rupee falls in March and early April due to higher import demand ahead of the Sinhala-Tamil New Year.
Sri Lanka kept its policy rates steady at multi-year lows on Friday, as expected, as it hopes that slowing private sector credit expansion will rebound and push up the country’s growth pace.
Dealers said lack of credit growth will help reduce the downward pressure on the rupee.
The currency has gained 0.3 percent in the 17 sessions through Friday, Thomson Reuters data showed. It has been on a rising trend since Feb. 27 amid weak demand for dollars from importers, dealers said.
Dealers said the rupee was expected to trade in a range of 130.50 to 130.75 in the near term.
At 0551 GMT, Sri Lanka’s main stock index was up 0.22 percent, or 13.20 points, at 5,927.96.(Reuters)
