COLOMBO: The Sri Lankan rupee rose on Thursday to near its one-year high as exporters and banks sold dollars, while state banks lowered the greenback buying rate by 2 cents.
Dealers said the two state banks, through which the central bank intervenes to direct the market, bought dollars at 130.28 rupees, 2 cents below the previous day, to prevent sharp volatility in the currency.
The rupee was traded at 130.28/25 per dollar at 0515 GMT, its highest since June 20, 2013 and firmer from Wednesday's close of 130.28/33.
"The central bank further lowered the buying rate by two cents to 130.28 from its yesterday's level of 130.30," said a currency dealer asking not to be named. "There are inflows and we do not see imports, not many oil bills also, so the rupee is in an appreciating trend." Two other dealers confirmed the move.
Central bank officials were not immediately available for comment. On Monday, the central bank had said dollar buying by state banks was for oil imports.
An official at the central bank's International Operations Department told Reuters on Monday the bank had been buying only excess dollars.
Central bank governor Ajith Nivard Cabraal told Reuters on Friday that the central bank would keep intervening in currency markets to prevent a rapid rise in the rupee.
He said the country would probably see a tendency for the rupee to appreciate in the next few years, and the central bank was keen that whatever movement takes place happens in a "fairly gradual" manner. Ananda Silva, one of the two deputy governors at the central bank, told Reuters last week that the monetary authority has absorbed over $400 million as of May 27 this year to prevent a sharp gain in the rupee.
Dealers say the central bank's intervention has prevented gains in the currency and expect it to face upward pressure until credit growth and imports pick up.
Despite multi-year low interest rates, data on May 5 showed private sector credit grew at a four-year low of 4.3 percent in March from a year earlier. It hit a record 35.2 percent in March 2012.
Sri Lanka's main stock index was nearly flat, down 0.04 percent at 6,283.42 at 0530 GMT.
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