COLOMBO: The Sri Lankan rupee closed steady on Thursday as dollar-buying by two state banks prevented sharp gains in the local currency due to inflows from inward remittances and exporter dollar sales amid mild importer demand for the greenback, dealers said.
The rupee ended at 130.21/22 per dollar, unchanged from Wednesday's close.
Dealers said the rupee is still facing an upward pressure with the two state banks buying dollars at 130.21 rupees.
Usually the central bank intervenes through the two state banks to direct the market to smoothen volatility. But dealers said it was not clear if the state bank buying was on behalf of the central bank.
The International Monetary Fund (IMF) on Wednesday urged Sri Lanka to limit its intervention in the foreign exchange market.
The IMF said the central bank's intervention in the foreign exchange market may create a perception that the rupee was implicitly fixed and could lead market participants and firms to hold un-hedged foreign exchange risk on their balance sheets.
The central bank has absorbed more than $750 million from the market to prevent a sharp appreciation and support exporters.
Finance Secretary P.B. Jayasundera said last week that Sri Lanka was building up its foreign exchange reserves while keeping its currency stable as the island nation sees more dollar inflows.
Jayasundera attributed the increased inflows, which the central bank has been absorbing, to a rise in inflows from exports, tourism and remittances.
Dealers had been expecting the rupee to appreciate due to weak growth in imports and private sector credit, despite multi-year low interest rates.
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