COLOMBO: Sri Lankan rupee forwards ended slightly weaker on Friday on importer dollar demand while the spot rupee was not traded except for swap deals after the central bank through moral suasion prevented banks from trading the spot currency in the past week, dealers said.
The central bank held the key policy rates steady as expected before the market opened on Friday, a day after its head said a reversal of the falling trend in t-bill yield was a signal of where the authorities want rates to be.
Three-day forwards, which were actively traded in the absence of spot, ended at 130.80/85 per dollar compared with Thursday's close of 130.75/80.
The spot currency was not traded other than the swap trades. It ended at 130.60/80 with compared with Thursday's close of 130.70/75.
"There was importer dollar demand," said a currency dealer asking not to be named. Dealers said the market was waiting for cues from the 2015 budget, to be presented on Oct. 24.
The rupee has been under pressure since the central bank announced steps to boost credit to the private sector in its September monetary policy review.
The central bank, at its policy rate announcement on Friday, said short-term money market rates have broadly stabilised while long-term lending rates are adjusting downwards after some initial volatility in the domestic money market in response to the monetary policy measures taken in September. Central Bank Governor Ajith Nivard Cabraal on Monday said there would be a greater tendency for the rupee to appreciate gently in light of the improvements in the external account.
The central bank in the last week of September limited the spot range to between 130.40 and 130.50 to prevent any sharp falls amid heavy selling in stocks and a pullback by foreign investors from government securities. Currency dealers said the rupee would trade steady until year-end on central bank intervention and healthy foreign exchange reserves of more than $8.7 billion.
Overseas investors sold a net 29.4 billion rupees ($225.29 million) worth of government securities in the four weeks through Oct. 15, data from the central bank showed.
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