COLOMBO: The Sri Lankan rupee ended weaker on Friday due to dollar demand from importers and banks, while dealers said the central bank's moral suasion capped the local currency at 130.40 and forwards picked up as a result.
The spot currency was quoted at 130.40/50 per dollar. Dealers said the spot rupee did not trade above 130.40 as banks were reluctant to trade beyond this level due to moral suasion by the central bank.
The rupee had closed 130.35/45 on Thursday.
However, the three-day forwards or spot next, which was actively traded in the absence of spot trade, ended at 130.50/60 per dollar, down from Thursday's close of 130.41/43, dealers said.
"There is huge pressure on the rupee, but due to moral suasion the spot did not move beyond 130.40 and forwards picked up," said a currency dealer asking not to be named. A bond trader said there was some foreign selling in government bonds.
Treasury Secretary P.B. Jayasundera said on Thursday the rupee's appreciation was unavoidable due to higher export earnings and inflows from services.
The central bank in the last week of September limited the spot currency range to between 130.40 and 130.50, to prevent any sharp falls amid heavy selling in stocks and pullback by foreign investors from government securities.
Currency dealers expect the rupee to weaken due to sustained selling by foreign investors in government securities, which are already at multi-year lows, rising imports in a low interest-rate environment, and strengthening of the dollar globally.
Overseas investors sold a net 16.9 billion rupees ($129.7 million) worth of government securities in the week ended Oct. 1, after selling 5.07 billion rupees worth of government securities in the previous week, data from the central bank showed.
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