COLOMBO: The Sri Lankan rupee traded firmer on Thursday as a state-run bank, through which the central bank usually directs the market, sold dollars at 133.60, 10 cents lower from the previous session's close, dealers said.
The rupee traded at 133.60 per dollar, up from Tuesday's close of 133.70. Both currency and stock markets were closed for a holiday on Wednesday.
"The state bank sold dollars at a reduced price of 133.60," a currency dealer said.
"There is no big importer demand. But whether the central bank could sustain this appreciation trend is questionable because import demand could pick up due to lower interest rates."
Some dealers say the pressure on the rupee could build up again as exporters might stop selling dollars until the elections are over.
President Maithripala Sirisena dissolved parliament on Friday and scheduled the election for Aug. 17, in an effort to consolidate power and push through political reforms, ending a months-long deadlock.
Depreciation pressure on the currency eased, dealers said, after Finance Minister Ravi Karunanayake said early last week the spot would climb 3 percent to a two-year high of 130 per dollar in two weeks.
Dealers, however, said that with the announcement of the elections, the rupee may not reach that level.
Three-month forwards traded a tad firmer at 135.20/45 per dollar at 0711 GMT, compared with Tuesday's close of 135.35/45, dealers said.
In the stock market, the benchmark index was down 0.31 percent at 6,998.93 as of 0712 GMT, falling below a key psychological level of 7,000 for the first time since April 15, Thomson Reuters data showed.
Turnover stood at 272.4 million rupees ($2.04 million).
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