COLOMBO: The Sri Lankan rupee held near 10-month lows on Friday as importer dollar demand prevented the currency from recovering, while further downside was contained by a vigilant central bank eager to hold the greenback below 132 rupees, dealers said.
The rupee was quoted at 131.60/70 at 0510 GMT, staying steady from its Thursday's close. Spot rupee dropped to 131.65/75 on July 25, its lowest close in nearly 10 months.
"There is genuine importer dollar demand but rupee is trading flat," said a currency dealer on condition of anonymity.
Some dealers said that they moved in to one-day forwards instead of spot trade following the central bank's earlier direction to banks not to accept bids above 131.60 rupees.
The one-day forward ended steady at 131.70/75, compared with Thursday's close.
Dealers said the pressure on the currency remains as exporters took a wait-and-see approach, while remittances had also dried up, adding that downward pressure on the rupee could intensify if there were no dollar inflows in the short term.
The rupee has fallen around 4 percent since June 7, with foreign investors pulling out of Sri Lanka's treasury bonds due to a rise in US treasury yields on expectations that the Federal Reserve will soon begin ti trim its stimulus programme.
Dealers expect the rupee to move in a 131.50 to 132.00 range in the short term and continue to depreciate unless the central bank steps in with monetary tightening measures or significant dollar inflows come into the country.
The central bank last month said foreign inflows are expected into government securities and the downward pressure on the currency would ease.
Sri Lanka's economy is expected to grow at 7.5 percent this year, higher than the International Monetary Fund's estimate of 6.3 percent and up from last year's 6.4 percent growth.
However, economists are more guarded about the outlook. While private sector credit growth is slowly picking up, they say this isn't sufficient to help the economy expand by 7.5 percent this year despite the central bank's easy monetary policy stance since December.
Sri Lanka's main stock index was 0.21 percent, or 12.067 points, firmer at 6,169.27 at 0531 GMT.
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