COLOMBO: The Sri Lankan rupee ended steady on Monday as inflows from remittances and exporter dollar sales offset the demand for the U.S. currency from banks due to lower rupee liquidity.
Dollar purchases from two state banks helped to curb volatility in the currency by mopping up liquidity and smoothening transactions, dealers said.
The rupee ended at 130.26/28 per dollar, little-changed from Friday's close of 130.26/27.
One-month forward premiums were steady at 22/28 cents, its lowest since May 3, 2011 on hopes of further gains in the currency, dealers said.
"Some banks sold dollars due to tight rupee liquidity," a dealer said.
Dealers also said that the state banks bought at 130.26.
The central bank usually directs the market through the two state banks. But dealers said it was not quite sure if the state banks were buying for the central bank.
Central bank officials were not immediately available for comment.
Dealers said the fuel import bill, which accounts for around 20 percent of monthly imports, is also on the decline because the country has been shifting to alternative power sources such as coal and hydro.
They see the rupee trading between 130.40 and 130.50 per dollar in the event of any downward pressure in the next one month and expect imports and credit growth to pick up from August.
An official at the central bank's International Operations Department said on Wednesday the bank has been buying excess dollars from the market.
Some dealers expect the rupee to face downward pressure due to continued imports and the possible fallout from the government spokesman's announcement that the country had imported Iranian crude via third parties to avoid Western sanctions.
Currency dealers said it was too early to speculate on the implications of the U.S. sanctions.
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