COLOMBO: The Sri Lankan rupee edged higher on Tuesday as a loan agreement with the International Monetary Fund last week and the announcement of a $1.5 billion bond issue boosted sentiment.
The central bank, which had been trading the spot rupee at 143.90, has started buying it at 145.70 through state banks, two dealers said .
Officials from the central bank were not available for comment.
The spot rupee has barely seen any trading since Jan. 27. Though it was not actively traded on Tuesday, the movement in short-term dollar/rupee forwards indicated the rupee was being bid up.
The spot next dollar/rupee forwards, which indicate prices for the rupee on the day following the conventional spot rate settlement, and in this case are five days ahead, were being quoted as a proxy for the spot currency and ended at 146.00/20 per dollar compared with Friday's close of 146.10/20. The markets were closed on Monday for a bank holiday.
"The IMF announcement has helped to instil some confidence," a dealer said, asking not to be named.
"Inflows from the $1.5 billion bond issue could also help the rupee to gain."
Another dealer said some foreign banks were selling dollars because of possible inflows to them and as the pressure due to importer demand has been easing.
On Friday, the IMF said it had reached a staff-level agreement with Sri Lankan authorities for a $1.5 billion, three-year loan to help the island nation avert a balance of payments crisis.
On Sunday, a top finance ministry official told Reuters that the government will raise $1.5 billion by selling a 10-year sovereign bond within the next 10 to 12 days.
The rupee has been under pressure as foreign investors sold government securities amid Sri Lanka's economic woes.
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