COLOMBO: The Sri Lankan rupee traded around a one-month low on broad dollar strength on the back of firm US GDP data and as state banks bought dollars for year-end seasonal importer demand.
The spot rupee was quoted 131.15/20 at 0553 GMT weaker from Thursday's close of 131.10/15 per dollar, its lowest close since Oct. 8.
"Nobody wants to trade spot above 131.10 as they don't want to answer the questions of the central bank," a dealer said on condition of anonymity, noting that actual trades occurred at or just below 131.10 and only screen quotes were available above that level.
Dealers said one of the two state banks, through which the central bank usually directs the market, bought dollars at 131.10 rupees, suggesting an unofficial cap for the currency.
Though moral suasion or intervention by the central bank was not seen, dealers said banks did not trade spot above 131.10 and banks traded three-day forwards instead of the spot rupee.
The three-day forward was traded at 131.22/28 rupees a dollar, compared to Thursday's close of 131.15/20.
Demand for four-day rupee forwards also was seen in the market. Dealers expect the currency to be weighed down by continued importer dollar demand ahead of the December festive season.
However, the pressure on the rupee should start to ease off on offshore remittances by the middle of next month, they said.
Central Bank Governor Ajith Nivard Cabraal last week said the rupee could come under pressure due to importer dollar demand ahead of the December festival season, but the market could manage the demand "itself without much intervention".
The rupee hit a record low of 135.20 on Aug. 28, but has managed to stem further losses and is up 3.1 percent since then. At 0555 GMT, Sri Lanka's main stock index was down 0.14 percent or 8.34 points at 5,862.13, its lowest since Oct. 7.
Stockbrokers said sluggish growth in the September quarter earnings has hit sentiment. Bellwether stocks such as conglomerate John Keells Holdings and top mobile phone operator Dialog Axiata posted a 15 percent and 68 percent fall respectively in their quarterly earnings.
A raft of listed firms are expected to release their quarterly earnings during this month.
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