COLOMBO: Sri Lanka's rupee traded steady on Monday supported by an earlier directive by the central bank not to trade the currency beyond a certain level, but it still remained under pressure, dealers said.
The central bank had directed banks not to trade cash as well as one-day- and two-day- forwards beyond 133.00 per dollar and spot next or three-day forwards beyond 133.05.
The rupee spot next, which was active in the market in the absence of spot trade, was flat at 133.05/15 per dollar.
"The rupee is flat in dull trade with the central bank directions," a currency dealer said.
Another dealer said though the central bank did not give any fresh directions on the rupee on Monday, banks did not trade beyond the monetary authority's earlier direction. The dealer said banks have adapted to the central bank's direction through moral suasion.
Last week, central bank Governor Ajith Nivard Cabraal said moral suasion is in the Monetary Law Act as well as in almost every country's central banking laws and all central banks are expected to make use of such instruments.
On Thursday, Cabraal said the rupees' falling trend has reversed course and stabilised, unlike other emerging market currencies, and the central bank expects the currency to stabilise more due to $209 million in inflows.
The rupee hit a record low of 135.20 to the dollar on Aug. 28, before recovering slightly.
The spot rupee was quoted at 133.00/133.10 at 0720 GMT, Thomson Reuters data showed.
The rupee has been falling since early July with foreign investors pulling out of Sri Lankan treasury bonds as US treasury yields rose on expectations the Federal Reserve would soon begin to taper its big bond buying programme.
The central bank's latest data showed foreign holdings in government securities fell 2.2 percent to 482.4 billion rupees ($3.63 billion) in the week ended on Sept. 4, after falling 2 percent in the previous week.
Cabraal, however, said foreign holdings in government securities are still well above the threshold of 12.5 percent of the total outstanding T-bills and T-bonds.
The rupee has fallen nearly 4 percent this year, after depreciating around 10 percent in 2012.
Sri Lanka's main stock index was steady by 0729 GMT. It had fallen in the last five straight sessions through Friday to a 6-month closing low.
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