COLOMBO: The Sri Lankan rupee was little changed on Wednesday as moral suasion by the central bank averted a fall amid sustained importer dollar demand, forcing dealers to trade in currency forwards, dealers said.
The rupee was traded at 130.28/32 per dollar at 0510 GMT, compared to Tuesday's close of 130.31/40. Dealers said moral suasion by the central bank prevented trades above 130.28 and forced trading in forwards.
"Nothing is being traded above 130.28. There is importer dollar demand, but moral suasion is there," said a currency dealer, asking not to be named. Another currency dealer confirmed the move.
A central bank official did not want to comment on moral suasion.
"At the moment the spot is trading at 130.28 and when money flows into market in future, we can't hold this. Cash and forwards are trading," the official said.
The three-day forward or spot next was traded at 130.34/35 per dollar at 0546 GMT compared to Tuesday's close of 130.32/38. Dealers said a swap arrangement between the central banks of China and Sri Lanka is viewed as positive as it is considered an insurance hedge for Sri Lanka.
"It gives us a big insurance in geopolitical turmoil and internally in a balance-of-payments crisis," a currency dealer said.
Sri Lanka's central bank and the People's Bank of China on Tuesday entered into a three-year currency swap deal to facilitate the exchange of a maximum of 225 billion rupees ($1.73 billion) and 10 billion yuan ($1.63 billion), the central bank said in a statement.
Sri Lanka shares were up 0.1 percent at 7,183.49 at 0558 GMT, hovering around their highest since June 10, 2011. Turnover stood at 728.9 million rupees ($5.60 million), with 55 million shares changing hands.
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