COLOMBO: The Sri Lankan rupee traded a tad weaker on Wednesday as a state bank bought dollars to pay import bills amid slight exporter dollar conversions.
Dealers said they expected the Sri Lankan currency to rise if the central bank does not intervene heavily, fed by steady inflows in the absence of strong demand for imports and credit.
The rupee was traded at 130.40/44 per dollar at 0646 GMT, a tad weaker from Tuesday's close of 130.35/40. One of the two state banks, through which the central bank directs the market, bought dollars, dealers said.
"Today we have seen some import demand," said a currency dealer.
The central bank has been preventing rupee appreciation over the last few weeks as steady inflows pressured the currency upward amid slack demand for private sector credit and imports.
While maintaining the policy rate for the fourth straight month on Tuesday, Sri Lanka's central bank said it expected to introduce a new guarantee scheme for gold loans to boost credit growth that hit a four-year low in March.
Despite a multi-year low interest rate regime, data showed private sector credit grew at a four-year low of 4.3 percent in March from a year earlier, while imports in February fell 6.2 percent on the year.
Dealers expect the rupee to face upward pressure until credit growth and imports reverse the trend.
On Monday, central bank governor Ajith Nivard Cabraal said private sector credit growth would pick up to around 15 percent by end-2014 and continue to improve through 2016.
Sri Lanka's main stock index was down 0.16 percent, or 9.81 points, at 6,301.38 points by 0651 GMT.
Turnover was at 204.5 million rupees ($1.57 million), with 19.8 million shares changing hands.
Stockbrokers said many investors had been compelled to return to the market due to the low interest rates that have made fixed-income assets less attractive.
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