COLOMBO: The Sri Lankan rupee ended weaker on Wednesday on importer dollar demand, but dealers expect the local currency to face upward pressure until demand for imports and credit pick up amid steady inflows.
The rupee ended at 130.45/48 per dollar, weaker from Tuesday's close of 130.38/42.
"There is importer (dollar) demand, probably to cover oil bills," said a currency dealer.
The central bank has absorbed over $400 million so far this year to prevent a sharp appreciation in the rupee, deputy governor Ananda Silva told Reuters.
Central bank Governor Ajith Nivard Cabraal told Reuters on Friday that the currency was performing as the bank expected, and there was no pressure to appreciate or depreciate.
While maintaining the policy rate for the fourth straight month last week, Sri Lanka's central bank introduced a new guarantee scheme for gold loans to boost credit growth that fell to a four-year low in March.
Despite multi-year low interest rates, data last week showed private sector credit grew at a four-year low of 4.3 percent in March from a year earlier. It hit a record 35.2 percent in March 2012.
The latest trade data on Monday showed imports have gained 8.2 percent in March, while exports hit a record high of $1.07 billion, helping to narrow the March trade deficit by 15.5 percent compared to a year ago.
Dealers expect the rupee to face upward pressure until credit growth and imports pick up.
Cabraal said on May 19 that private sector credit growth would pick up to around 15 percent by end-2014 and continue to improve through 2016.
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