The Sri Lankan rupee traded steady on Wednesday as thin importer dollar demand was offset by exporter sales of the greenback. Dealers expect the local currency to remain stable until imports pick up sharply.
The spot rupee was quoted at 130.62/68 per dollar at 0626 GMT, little changed from Tuesday’s close of 130.62/67.
The central bank kept policy rates steady at multi-year lows, as expected on Tuesday, and expressed confidence that private sector credit growth would rebound in the second quarter and push up the pace of economic expansion.
“There is very less import demand and it was matched by exporter dollar sales. We will see the rupee trading at these levels in the short term,” said a currency dealer.
Many dealers said they are surprised with lower credit demand from the private sector even though key interest rates are at multi-year lows since January.
Private sector credit grew 4.4 percent year-on-year in February, the slowest since May 2010, latest data from the central bank showed. That compared with a growth of 5.2 percent in January this year and 13.3 percent in February 2013.
Dealers said the market is awaiting some direction from the weekly treasury bill auction due later on Wednesday, to see if the central bank would allow yields on T-bills to ease further.
They expect the rupee to trade in a range of 130.60-70 in the near future. It has been hovering between 130.55 and 130.70 per dollar since March 3, Thomson Reuters data showed, with the central bank intervening to smoothen sharp volatility.
There has been a gradual increase since mid-March in remittances by Sri Lankan expatriates to their relatives, while dollar selling has also increased as exporters paid bonuses to their employees.
Those inflows have helped ease depreciation pressure, which was seen in the early part of the year.
Sri Lanka’s main stock index was down 0.18 percent, or 10.98 points, at 6,180.85 as of 0629 GMT. It had closed at its highest level since Feb. 3 in the previous session.
By 0630 GMT, the market turnover was 283.4 million rupees ($2.17 million), with 9.8 million shares traded, exchange data showed, Reuters reports.
