COLOMBO: The Sri Lankan rupee ended little changed on Monday as dollar selling by banks to cover short positions offset late importer demand for the greenback, dealers said.
President Mahinda Rajapaksa, who is also the finance minister and is seeking an unprecedented third six-year term, unveiled the 2015 budget on Friday that trims value-added taxes and cuts deficit, while providing a range of handouts, mainly for rural communities.
The spot currency ended at 130.85/90 per dollar compared with Friday's close of 130.85/95. It was largely untraded last week on the central bank's moral suasion.
"Importer dollar demand was seen in the latter part of the day," a currency dealer said.
Dealers said the rupee will face downward pressure because lower rates and a stable exchange rate maintained by the central bank would encourage more imports in the medium term.
"But if investments in industries take place after the tax incentives in the budget, it will help the currency to be stable or even to appreciate in the long term," a trader said.
Dealers said no moral suasion from the central bank was seen on Monday, but throughout last week it had persuaded some banks not to trade the spot and three-day forwards below certain levels to prevent sharp volatility.
Nandalal Weerasinghe, a central bank deputy governor, said on Oct. 20 the monetary authority would intervene to prevent short-term volatility in the rupee.
Overseas investors have sold a net 30.9 billion rupees ($236.2 million) worth of government securities in the five weeks through Oct. 22, data from the central bank showed.
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