COLOMBO: The Sri Lankan rupee traded a tad weaker on Monday on importer dollar demand through private banks in the absence of intervention by state banks, but the market expects the currency to strengthen due to inflows from a sovereign bond sale.
Dealers said investors were waiting to see the impact of inflows from a $1 billion sovereign bond issue, which has already come to the market.
The spot rupee was traded at 130.75/78 per dollar at 0656 GMT, a tad weaker from Friday's close of 130.73/75.
"There was demand for dollars from importers through private banks and no state banks intervened in the market," said a dealer.
The rupee is expected to appreciate after the bond issue, though the gains would depend on whether the central bank wants to mop up the inflows to build up its reserves or increase dollar liquidity in the market, dealers said.
The central bank said on Jan. 2 it expected the rupee to strengthen in the medium term and any direct intervention in the foreign exchange market would be minimum.
The rupee has gained about 3.4 percent since it hit a record low of 135.20 on Aug. 28. It lost 2.5 percent in 2013.
At 0658 GMT, Sri Lanka's main stock index was up 0.73 percent or 44.61 points at 6,175.66.
It has gained 3.88 percent in the last eight straight sessions after the central bank cut the reverse repurchase rate by 50 basis points to a multi-year low early this month.
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