COLOMBO: Sri Lankan rupee forwards ended weaker on Tuesday due to importer dollar demand, with the central bank pegging its desired level for the currency through moral suasion, even as political uncertainty weighed ahead of the presidential polls next month, dealers said.
The island nation's health minister, Mithripala Sirisena, said on Friday he would contest against President Mahinda Rajapaksa in the January 8 presidential poll. Since the poll was announced, six other legislators have defected.
The spot currency was quoted weaker at 131.25/35 in early trade but ended flat at 131.00 compared to Monday's close after the central bank sold dollars at 131.00 in small deals, dealers said.
"The central bank allowed the spot to trade up to 131.25 and was then defending it via moral suasion. The spot next is kept at 131.50 per dollar," a currency dealer said on condition of anonymity.
Three-day forwards, or spot-next, ended at 131.50 per dollar, weaker from Monday's closing level of 131.25/50.
Dealers said four-day forwards, or spot-next-next, were actively traded due to moral suasion in the spot-next. It touched a low of 131.95, before ending at 131.95/132.00 per dollar.
Exporters and banks were reluctant to sell dollars on expectation the currency would weaken further, they added.
An official at the central bank's international operations department however said that there was nothing unusual in Tuesday's rupee trades.
"When there is inflow we buy and when there is outflow we sell. We did not see any unusual pattern today," said the official.
Overseas investors bought a net 457.8 million rupees worth of government securities for the week ended Nov. 19. They sold a net 39.1 billion rupees ($298.5 million) in the eight weeks through Nov. 19, data from the central bank showed.
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