COLOMBO: Sri Lankan rupee forwards recovered on Wednesday due to exporter dollar sales after falling in early trade due to equity-related outflows and importer dollar demand, dealers said.
Moral suasion by the central bank capped any sharp fall in the local currency below 130.50, dealers said. The spot currency was not quoted on Wednesday. It was quoted at 130.80 per dollar at the close on Tuesday.
"Exporter dollar conversions came in and the rupee ended firmer," a currency dealer said, adding that the rupee forwards picked up in the absence of effective spot trade.
Three-day rupee forwards or spot next touched a low of 131.05 per dollar before recovering to close at 130.60/70, higher from Tuesday's 130.75/95, dealers said.
Dealers said the spot next was also capped at 130.90 through moral suasion after it fell below 131.00.
Equity-related outflows weighed on the currency after Sri Lanka's stock market saw foreign selling worth 4.4 billion rupees ($33.7 million) in the last three sessions through Tuesday.
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.
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. ($1 = 130.6000 Sri Lankan rupee)
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