COLOMBO: The Sri Lankan rupee ended steady on Wednesday as state banks sold dollars to offset demand for the US currency from importers and on stock-related outflows, dealers said. The spot rupee ended flat at 130.85/90 per dollar.
"The rupee continued to be on bid and there were not too many sellers," said a currency dealer, asking not to be named. Dealers also said the forward market was active in the absence of an effective spot market.
Spot-next or three-day forward ended at 130.93/131.00 per dollar. It was not active on Tuesday, dealers said.
Three dealers confirmed that the two state banks, through which the central bank usually directs and intervenes in the market, sold dollars at 130.85 rupees.
Sri Lanka's central bank on Monday kept policy rates steady at multi-year lows, with inflation expected to be contained throughout 2014 by "well-managed demand conditions and improved domestic supply."
The market is still concerned about the sustainability of the central bank's policy measures to maintain a stable exchange rate, which is defended via selling and buying dollars, in a low-interest-rate regime.
However, central bank Governor Ajith Nivard Cabraal said on Monday that "current conditions are sustainable," for lower interest rates and a stable exchange rate, but did not elaborate.
Currency dealers and traders said the central bank's policies should work until the market sees a jump in private sector credit growth, which has risen 7.5 percent year-on-year in December from 7.3 percent a month earlier. Dealers expect the central bank to keep the currency below 130.85 per dollar until April.
Usually, the rupee is under pressure in March and early April due to seasonal imports ahead of the traditional new year in mid-April.
The rupee has gained about 3.3 percent since it hit a record low of 135.20 on Aug. 28 last year. It lost 2.5 percent in 2013.
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