The Sri Lankan rupee traded steady on Tuesday despite importer dollar demand, as banks were reluctant to trade the local currency beyond 130.70 per dollar due to continued moral suasion by the central bank, dealers said.

 

However, the currency is likely to gain due to expected inflows from remittances in early April, dealers said.

 

The spot rupee was steady at 130.70/75 per dollar at 0630 GMT.

 

The rupee forwards were weaker at 130.73/75 per dollar, compared with Monday’s close of 130.72/74. But the pressure on the forwards is expected to ease due to remittances, exporter and bank dollar sales ahead of the festive season, dealers said.

 

“The inward remittances are going to offset the demand,” a currency dealer said on condition of anonymity.

 

Dealers said the central bank had asked banks to keep the rupee at the 130.70-per-dollar level to reduce volatility

 

On Monday, Nandalal Weerasinghe, one of the central bank’s deputy governors, told Reuters that the central bank has not changed its policy of not targeting any specific rate but moral suasion is one of the instruments many central banks use to manage short-term volatility.

 

Dealers expect the rupee to appreciate from early April, with a dip in importer dollar demand and a rise in inward remittances before the traditional Sinhala-Tamil New Year.

 

Central bank Governor Ajith Nivard Cabraal said on March 19 that the rupee would be stable throughout this year due to increasing inflows from exports and remittances.

 

Dealers said lack of credit demand for imports will help reduce downward pressure on the rupee.

 

The currency gained 0.25 percent since Feb. 27, but has fallen 0.08 percent so far this year, Thomson Reuters data showed.

 

At 0638 GMT, Sri Lanka’s main stock index was up 0.3 percent, or 17.62 points, at 5,985.93. (Reuters)