COLOMBO: The Sri Lanka rupee traded near a one-year high on Monday as dollar sales by exporters and banks outpaced light importer demand, while two state banks through which the central bank directs the market, bought the greenback to prevent sharp volatility in the local currency.
The rupee was traded at 130.26/28 per dollar, its highest since June 28, 2013 and slightly firmer from Friday's close of 130.26/30.
Dealers said the two state banks bought dollars at 130.26 rupees per dollar as the central bank allowed gradual appreciation in the currency to prevent shocks.
The central bank bought the currency at 130.35 through the two banks on May 30 and started lowering its buying rate since last week, allowing a gradual appreciation.
Central bank Governor Ajith Nivard Cabraal told Reuters on Friday that the rupee was facing some appreciation pressure and the bank was allowing the trend on a gradual basis to allow all stakeholders to adjust to the changes, without any shocks.
He had said earlier that the central bank would keep intervening in currency markets to prevent a rapid rise in the rupee.
The central bank has absorbed over $400 million as of May 27 this year to prevent a sharp gain in the rupee.
Dealers said the central bank intervention has prevented gains in the currency and they expect it to face upward pressure until credit growth and imports pick up.
Despite multi-year low interest rates, data last month showed private sector credit grew at a four-year low of 4.3 percent in March from a year earlier.
"There's not much of imports but we can see steady inflows," said a currency dealer asking not to be named.
Sri Lanka's main stock index was up 0.11 percent, or 6.68 points, at 6,285.82 at 0543 GMT.
Turnover was 1.02 billion rupees ($7.8 million), with 18.59 million shares changing hands on foreign buying in conglomerate John Keells Holdings.
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