The Sri Lankan rupee traded at its highest level in more than six months on Friday due to inflows from remittances, with dealers saying the local currency is gaining in the absence of credit demand and imports.

The rupee was traded at 130.38/42 per dollar at 0635 GMT, its highest intraday level since Nov. 7, and firmer from Thursday’s close of 130.50/52.

“We are giving effect to the present trend in a gradual manner,” central bank Governor Ajith Nivard Cabraal told Reuters.

Dealers said steady inflows from remittances and exporter conversions amid lack of importer dollar demand led to appreciation in the local currency.

“There is no intervention from the central bank and one state bank was buying on behalf of a state-run oil firm. The state bank was buying at 130.40 rupees per dollar,” said a currency dealer on condition of anonymity.

The currency ended firmer at its highest close since Oct. 24 on Thursday after one of the two state banks, through which the central bank usually intervenes in the market, stopped buying the dollar at 130.60 and allowed market forces to determine the level of the rupee.

Many dealers said the rupee would be under upward pressure until lower credit growth and imports reverse their trend.

Despite a multi-year low interest rate regime, latest data showed private sector credit grew 4.4 percent in February from a year earlier, the slowest expansion since May 2010, while imports in February fell 6.2 percent on year.

Dealers said lack of credit expansion and a contraction in imports could hit economic growth unless the government props up expansion through infrastructure funding.

The central bank, in its monetary policy statement last month, however expressed confidence that private sector credit growth would rebound in the second quarter and push up the pace of economic growth.

The currency has been hovering between 130.55 and 130.70 since March 3, Thomson Reuters data showed, with the central bank intervening to smoothen any sharp volatility.

Sri Lanka’s main stock index was up 0.34 percent, or 21.07 points, at 6,296.80 as of 0653 GMT, its highest since Dec. 6. Turnover was at 6.8 billion rupees ($52.11 million), with 613.5 million shares changing hands. - Reuters