COLOMBO: The Sri Lankan rupee was steady on Tuesday as inflows from remittances and exporter dollar sales offset demand for the US currency from importers despite state banks lowering their dollar buying rate by a cent.
The rupee was traded at 130.26/28 per dollar at 0526 GMT unchanged from Monday's close.
Dealer said state banks lowered the dollar buying rate by one cent from the previous session to 130.25 per dollar.
Purchases of dollars from two state banks helped curb volatility in the currency by mopping up liquidity and smoothening transactions, dealers said.
"There is import demand and demand from banks due to excess rupee liquidity but the state banks lowered the (dollar) buying rate by one cent," said a currency dealer asking not to be named. One-month forward premiums were steady at 22/28 cents, the lowest since May 3, 2011 on expectations of further gains in the currency, dealers said.
The central bank usually directs the market through the two state banks. But dealers said it was not quite sure if the state banks were buying for the central bank.
Central bank officials were not immediately available for comment.
Dealers said the fuel import bill, which accounts for around 20 percent of monthly imports, is also on the decline because the country has been shifting to alternative power sources such as coal and hydro.
They see the rupee trading between 130.40 and 130.50 per dollar in the event of any downward pressure in the next one month and expect imports and credit growth to pick up from August.
An official at the central bank's International Operations Department said on Wednesday the bank has been buying excess dollars from the market.
Some dealers expect the rupee to face downward pressure due to continued imports and the possible fallout from the government spokesman's announcement that the country had imported Iranian crude via third parties to avoid Western sanctions.
Currency dealers said it was too early to speculate on the implications of the US sanctions.
Sri Lanka's main stock index was 0.38 percent, or 24.74 points, firmer at 6,523.74 at 0635 GMT. Turnover was 762.1 million rupees ($5.85 million), with 96.1 million shares changing hands.
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