COLOMBO: The Sri Lankan rupee bounced slightly from a 10-month low on Thursday, but dealers said the currency remains vulnerable due to importer dollar demand.
The absence of dollar inflows and exporter sales of the greenback have also checked any sizable rebound in the rupee.
The rupee was quoted at 131.60/70 at 0510 GMT, firmer from its Wednesday's close of 131.65/70, its weakest finish since Sept. 19.
"The pressure is still there as exporters and the remittances are holding on," said a currency dealer on condition of anonymity.
"The easing of the pressure depends on foreign direct investment or inflows from remittances or exporter conversions."
Dealers said that downward pressure on the rupee could intensify if there were no dollar inflows in short term.
The rupee has fallen around 4 percent since June 7, with foreign investors pulling out of Sri Lanka's treasury bonds due to a rise in US treasury yields on expectations of a roll back by the Federal Reserve of its stimulus programme.
Dealers expect the rupee to move in a 131.50 to 132.00 range in the short term and continue to depreciate unless the central bank steps in with monetary tightening measures or significant dollar inflows come into the country.
The central bank last month said foreign inflows are expected into government securities and the downward pressure on the currency would ease.
Sri Lanka's economy is expected to grow at 7.5 percent this year, higher than the International Monetary Fund's estimate of 6.3 percent and up from last year's 6.4 percent growth.
However, economists say while private sector credit growth is slowly picking up, it's not sufficient to help the economy expand by 7.5 percent this year despite the central bank's easy monetary policy stance since December.
Sri Lanka's main stock index was 0.07 percent, or 4.05 points, firmer at 6,041.27 at 0532 GMT.
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