COLOMBO: The Sri Lankan rupee traded firmer on Wednesday on inflows from exporter dollar sales and inward remittances, while two state banks bought dollars at a lower level, dealers said.
The rupee was traded at 130.19/20 per dollar at 0645 GMT, firmer from Tuesday's close of 130.21/24. "There are regular inflows. State banks lowered the buying rate by two cents to 130.19 and there is not much demand from others.
The state banks are the buyers and directing the market," said a currency dealer.
Dealers said dollar buying by the two state banks, through which the central bank intervenes in the market, prevented sharp gains in the local currency.
Two central bank officials on Wednesday told Reuters that the monetary authority bought $218 million from the market on Tuesday and over $1 billion this year through Tuesday. Dealers said the currency would be under upward pressure in the absence of strong growth in private credit and imports.
The central bank's dollar purchases from the market to support exporters have increased rupee liquidity and sent yields on government securities lower amid lacklustre demand for private credit and imports, they said.
A central bank official said last month the rupee would have risen to 125 per dollar had the central bank not intervened. The IMF last week urged Sri Lanka to limit its intervention in the foreign exchange market, a week after Finance Secretary P.B. Jayasundera said Sri Lanka was building up its foreign exchange reserves while keeping the rupee stable with the country seeing more inflows.
Sri Lanka's main stock index was 0.22 percent, or 14.71 points, firmer at 6,830.13 at 0654 GMT.
Turnover was 859.5 million rupees ($6.6 million) with 26.3 million shares changing hands.
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