COLOMBO: The Sri Lankan rupee rose on Monday as inward remittances and dollar sales by exporters outpaced importer demand for the greenback, but further gains were capped by dollar-buying from state banks, dealers said.
The rupee ended at 130.15/16 per dollar, slightly firmer than Friday's close of 130.16/19. It had hit a two-week low of 130.26 per dollar on Wednesday.
One of the two state banks through which the central bank usually intervenes in the market bought dollars at 130.15, 1 cent below Friday's rate, to prevent any sharp gains and excessive volatility, dealers said.
Despite a sluggish trading in the local currency, the bond market was very active, dealers said.
"There is a correction in the yields of local bonds as most bond yields fell last week on the expectation of a possible rate cut on Friday. People are scared of huge liquidity in the market and worried about the lack of demand for credit," a dealer said.
Dealers also said bond yields gained in the secondary market for the second straight session after the central bank retained key policy rates on Friday.
The banking regulator kept key policy rates steady at multi-year lows for a seventh straight month, despite private sector credit growth slowing further.
Dealers said yields on five-year bonds were trading at 7.37/47 percent, 15 basis points (bps) higher than Friday.
Offshore investors sold a net 7.85 billion rupees ($60.3 million) worth of government securities in the week ended Aug. 13, official data showed.
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