COLOMBO: The Sri Lankan rupee traded flat on Monday despite foreign investors extending their selling spree of government securities from last week and dollar demand by importers as moral suasion by the central bank offset any depreciation in the local currency, dealers said.
"There are bond sales and the central bank's moral suasion prevented trades above 130.35," a dealer said.
Central Bank Governor Ajith Nivard Cabraal, however, said there was no heavy moral suasion as the bond outflow was marginal.
"As far as we know, there is only a very small bond outflow of about $4 million today and we can easily provide that liquidity because we absorbed those inflows," he told Reuters.
"There are also a number of foreign investors who are willing to buy these bonds. Even last week our net absorption was $15 million. Therefore, we don't see any need for heavy moral suasion or undue speculation by dealers or the media."
The spot currency was quoted at 130.40/45 per dollar at 0526 GMT, the same as Friday's closing level, and the lowest since June 2.
Three-day forwards or spot next were traded at 130.50/58 per dollar, weaker from Friday's close of 130.45/50.
The central bank's official data showed foreign investors had sold a net 5.07 billion rupees ($38.90 million) worth of government securities in the week ended Sept. 24.
Dealers said concerns over lower returns following the central bank's decision to limit bank deposits under its repo window have prompted some foreign investors to gradually pare their stakes in government securities.
They cited lower optimism for the currency's outlook after the central bank on Sept. 23 limited commercial banks' access to the standing deposit facility.
Sri Lanka's share index was up 0.09 percent, or 6.75 points, to 7,240.46 at 0548 GMT.
Turnover was 485.1 million rupees ($3.72 million), with 31.6 million shares changing hands.
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