COLOMBO: The Sri Lankan rupee rose against the US currency on Monday as inward remittances and dollar sales by exporters outpaced importer demand for the greenback even as state banks prevented any further appreciation, dealers said.
The rupee was trading at 130.15/17 per dollar, slightly firmer than Friday's close of 130.16/19. It had hit a two-week low of 130.26 per dollar on Wednesday.
One of the two state banks through which the central bank usually intervenes in the market bought dollars at 130.15, one cent below Friday's rate, to prevent sharp gains and excessive volatility, dealers said. "The dollar-rupee market was sluggish today but the bond market was very active," said a currency dealer.
"There is a correction in the yields of local bonds as most bond yields fell last week on the expectation of a possible rate cut on Friday. People are scared of huge liquidity in the market and worried about the lack demand for credit."
Dealers also said bond yields gained in the secondary market for the second straight session after the central bank retained key policy rates on Friday.
The banking regulator kept key policy rates steady at multi-year lows for a seventh straight month, despite private sector credit growth slowing further. Dealers said yields on five-year bonds were trading at 7.37/47 percent, 15 basis points (bps) higher than on Friday.
Offshore investors sold a net 7.85 billion rupees ($60.34 million) worth of government securities in the week ended August 13, official data showed.
Sri Lanka's main stock index was up 0.32 percent or 22.51 points at 6,966.36 at 0709 GMT, hovering close to its highest since Sept. 12, 2011.
Turnover was 893.7 million rupees ($6.87 million) with 39.1 million shares changing hands.
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