COLOMBO: The Sri Lankan rupee was weaker on Tuesday due to equity-related outflows and selling of government securities, but moral suasion by the central bank prevented sharp falls, dealers said.
The spot currency was quoted at 130.58/68 per dollar at 0721 GMT, weaker from Monday's close of 130.50/55.
However, dealers said the spot was not traded as the central bank asked banks not to trade above 130.43 per dollar and the forwards picked up as a result.
Three-day forwards or spot next was also quoted at 130.65/70 per dollar, weaker from Monday's close of 130.52/58.
"The spot is not trading. The rupee is weaker on equity outflows. But the central bank's moral suasion prevented a sharp depreciation," a dealer said.
Foreigners were net sellers of Lankan stocks on Monday, with outflows of 1.89 billion rupees ($14.5 million).
Currency dealers expect the rupee to weaken on the back of sustained foreign selling in government securities and higher imports in a low interest rates regime.
Some dealers said there was no dollar liquidity for imports.
The central bank could easily provide liquidity to facilitate foreign outflows from government securities as it absorbed those inflows, Governor Ajith Nivard Cabraal said on Monday.
Dealers said concerns over lower returns following the central bank's decision to limit bank deposits under its repo window have prompted some foreign investors to gradually pare their stakes in government securities.
They cited lower optimism for the currency's outlook after the central bank's decision last week to limit commercial banks' access to the standing deposit facility.
Sri Lanka's share index was up 0.16 percent, or 11.48 points at 7,249.64 at 0736 GMT.
Turnover was 3.48 billion rupees, with 48.5 million shares changing hands.
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