COLOMBO: The Sri Lankan rupee traded steady on Thursday despite importer dollar demand as dealers were reluctant to trade above the 130.70 level due to moral suasion by the central bank which forced the market to trade in forward, dealers said.
Banks were asked to keep the currency at the 130.70-per-dollar level, a measure used by the central bank to keep rupee volatility low, dealers said.
The spot rupee was traded at 130.70/75 per dollar at 0628 GMT.
"It is the spot next which determines the market," said a currency dealer.
An official at the central bank's international operations department denied dealers' claims of moral suasion and said the exchange rate is moving in the 130.65-130.75 range and there was not much volatility.
Dealers said the forward market was active and the three-day forward, or spot next, was traded 130.82/83 per dollar at 0631 GMT, weaker than Wednesday's close of 130.78/84.
Dealers also expect the rupee to appreciate from early April with a dip in importer dollar demand and a rise in inflows through inward remittances.
The local currency has been largely on the rise ahead of the traditional new year, contrary to market expectations.
The rupee usually falls in March and early April due to higher import demand ahead of the Sinhala-Tamil new year.
Central bank Governor Ajith Nivard Cabraal said last week the rupee would be stable throughout this year due to increasing inflows from exports and remittances into the island nation.
Dealers said lack of credit demand for imports will help reduce downward pressure on the rupee. The currency gained 0.25 percent in the 20 sessions through Wednesday, Thomson Reuters data showed.
It has fallen 0.08 percent so far this year.
The rupee has trended up since Feb. 27 amid weak demand for dollars from importers, said dealers.
They expect the currency to trade in a range of 130.50-130.75 in the near term. At 0636 GMT, Sri Lanka's main stock index was up 0.31 percent, or 18.42 points, at 5,966.39.
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