COLOMBO: Sri Lankan rupee forwards ended steady in dull trade on Tuesday as the central bank's moral suasion kept the local currency unchanged despite importer dollar demand, while dealers expect the rupee to remain under pressure on lower interest rates.
The central bank on Thursday allowed the spot rupee to fall for the first time in two months.
The stock and foreign exchange markets were closed on Friday for May Day and on Monday for a Buddhist religious holiday. Actively quoted one-month forwards ended steady at 134.90/135.00 as the central bank prevented it being traded below 134.90.
"The import demand is there and the rupee is under pressure as imports are picking up and the exporters are reluctant to sell (dollars)," said a currency dealer asking not to be named.
On Thursday, the central bank allowed a 10-cent fall in the spot rupee to 133.00 per dollar after holding it at 132.90 since February, when it set the level beyond which it would not allow the currency to fall.
Dealers, however, said the spot rupee did not trade on Tuesday as the central bank did not allow trades below 133.00.
Dealers said the central bank has been keeping the spot rupee and all forwards up to one-month steady through moral suasion.
Central bank officials were not available for comment.
The exchange rate is under pressure after the central bank slashed its key monetary policy rates on April 15 and market interest rates have been on a falling trend since then.
Yields on treasury bills fell 3 to 11 basis points (bps) at last week's auction, extending their decline to 41-51 bps since the rate cut.
Two-week and one-week forwards ended steady at 133.90/134.00 and 133.60/70 per dollar, respectively.
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