COLOMBO: The Sri Lankan rupee traded firmer on Wednesday due to inflows from remittances and exporter dollar sales amid light demand for the U.S. currency from importers while dollar buying by state banks curbed gains in the local unit.
The rupee was traded at 130.23/24 per dollar at 0724 GMT, a slightly up from Tuesday's close of 130.25/26.
"There is no demand for dollars and the state banks lowered the buy rate by two cents to 130.23. But there is no aggressive buying also," said a currency dealer, asking not to be named.
Dollar purchases by two state banks helped curb volatility by mopping up liquidity and smoothening transactions, dealers said.
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.
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 U.S. sanctions.
Sri Lanka's main stock index was 0.94 percent, or 62.05 points, firmer at 6,627.86 at 0727 GMT, mainly as lower interest rates compelled investors across the board to shift to risky assets.
Turnover stood at 2.24 billion rupees ($17.20 million), with 107.9 million shares changing hands.
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