COLOMBO: The Sri Lankan rupee traded weaker on Wednesday on importer dollar demand, but dealers expect the local currency to face upward pressure until demand for imports and credit pick up amid steady inflows.
The rupee was at 130.42/45 per dollar at 0706 GMT, weaker than Tuesday's close of 130.38/42. "There is importer (dollar) demand, probably to cover oil bills," said a currency dealer.
Central bank Governor Ajith Nivard Cabraal told Reuters on Friday that the currency was performing as the bank expected, and there was no pressure to appreciate or depreciate.
Dealers say the central bank had been preventing the rupee's appreciation over the last few weeks with steady inflows amid lower demand for private sector credit and imports.
While maintaining the policy rate for the fourth straight month last week, Sri Lanka's central bank introduced a new guarantee scheme for gold loans to boost credit growth that fell to a four-year low in March.
Despite multi-year low interest rates, data last week 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.
The latest trade data on Monday showed imports have gained 8.2 percent in March, while exports hit a record high of $1.07 billion, helping to narrow the March trade deficit by 15.5 percent compared to a year ago.
Dealers expect the rupee to face upward pressure until credit growth and imports pick up.
Cabraal said on May 19 that 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 0.12 percent, or 7.76 points, at 6,259.68 at 0708 GMT.
Turnover stood at 287.4 million rupees ($2.20 million), with 10.6 million shares changing hands.
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