COLOMBO: The Sri Lankan rupee was steady on Tuesday as exporter dollar conversions were offset by thin importer demand and greenback buying by a state bank, dealers said.
The rupee was at 130.33/37 per dollar as of 0607 GMT, little changed from Monday's close of 130.35/37, the highest since June 28, 2013. It gained 0.19 percent in the three sessions through Monday. "Still, there is appreciation pressure.
Today there were exporter conversions amid thin importer dollar demand. But we saw a state bank buying dollar at 130.35 rupees," said a currency dealer.
Central bank Governor Ajith Nivard Cabraal on Friday told Reuters that the central bank has been "giving effect to the present trend in a gradual manner". Dealers said steady inflows from remittances and exporter conversions amid lack of importer dollar demand led to appreciation in the local currency.
Many dealers said the rupee would be under upward pressure until credit growth and imports reverse their trends.
Despite a multi-year low interest rate regime, latest data showed private sector credit grew 4.4 percent in February from a year earlier, the slowest expansion since May 2010, while imports in February fell 6.2 percent on year.
Dealers said lack of credit expansion and a contraction in imports could hit economic growth unless the government props up expansion through infrastructure funding.
The central bank, in its monetary policy statement last month, however, expressed confidence that private sector credit growth would rebound in the second quarter and push up the pace of economic growth.
The currency has hovered between 130.55 and 130.70 since March 3 through Thursday, Thomson Reuters data showed, with the central bank intervening to smoothen any sharp volatility. Sri Lanka's main stock index was down 0.08 percent, or 4.95 points, at 6,298.21 as of 0617 GMT.
Turnover was at 440.2 million rupees ($3.38 million), with 20.3 million shares changing hands.
Stockbrokers say many investors have been compelled to return to the market due to multi-year low interest rates, which has made fixed-income assets less attractive.
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