COLOMBO: The Sri Lankan rupee edged up on Thursday on exporter dollar sales, with banks reluctant to trade the spot rupee beyond 131.15 per dollar, a day after intervention by a state-run bank held the currency at that level, dealers said.
As the rupee spot was not active after Wednesday's intervention, three-day forward or spot next was actively traded. At 0553 GMT, it was quoted at 131.25/35, a tad firmer from Wednesday's close of 131.30/35.
"The currency is more or less settled today. Yesterday was a one-off transaction and people must have panicked," said a currency dealer asking not to be named.
On Wednesday, the currency hit a seven-week low on importer dollar demand despite the intervention by state banks to hold the currency at 131.15.
Though the spot rupee was not active in the market, it was quoted at 131.15/25 per dollar, firmer from Wednesday's close of 131.20/35.
It ended at a more than six-week closing low of 131.15/25 on Tuesday. Central bank Governor Ajith Nivard Cabraal on Wednesday told Reuters that the monetary authority will intervene to keep the currency stable when there is excess volatility.
Dealers said the currency will be under downward pressure because of continuing importer dollar demand, but will recover due to expected exporter conversions and foreign remittances ahead of Christmas.
According to the 2014 budget presented in the parliament last week, maintaining a flexible exchange rate regime along with productivity improvement were emphasized to achieve the export revenue target of $20 billion in 2020.
Dealers and banks, however, said there would be hardly any change in the central bank's exchange rate policy as it was already under a flexible regime.
The rupee hit a record low of 135.20 on Aug. 28, but has managed to stem further losses and has gained 3.09 percent since then.
At 0540 GMT, Sri Lanka's main stock index was 0.11 percent, or 6.14 points, weaker at 5,738.53, its lowest since Sept. 20. It has fallen four straight sessions through Wednesday on budget woes and concerns over earnings outlook.
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