COLOMBO: The Sri Lankan rupee traded a tad firmer on Monday and hit a four-week high on inflows from exports and remittances, but the gains were limited due to dollar buying by two state banks to prevent a sharp appreciation in the local currency, dealers said.
Central bank governor Ajith Nivard Cabraal told Reuters on Saturday that the rupee will not be under downward pressure in the foreseeable future due to a policy aimed at building foreign reserves and that a gradual gain is expected.
The rupee was traded at 130.16/19 per dollar at 0615 GMT, its highest since July 21 and slightly firmer from Friday's close of 130.17/18.
"The rupee will continue to strengthen with the strong inflow from remittances and exporters," said a currency dealer.
"The capacity to borrow is restricted due to high taxation. But we might see import demand picking up after November," he said, adding that the market expects a big fiscal stimulus in the 2015 budget scheduled in November. "We might see importer demand and credit demand picking up (after November)."
Dealers said the two state banks, through which the central bank usually intervenes in the market, lowered the dollar-buying rate by one cent to 130.16 rupees.
The yield on one-year T-bills was trading as low as 6.35 percent in the secondary market on Monday, dealers said.
Sri Lanka's main stock index was 0.31 percent or 21.55 points higher at 6,936.78 at 0638 GMT, its highest since Sept. 14, 2011.
Turnover was 670.4 million Sri Lankan rupees ($5.15 million)with 23.7 million shares changing hands.
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