COLOMBO: Sri Lankan rupee traded steady on Tuesday in dull trade as investors waited for direction on interest rates from a weekly t-bill auction after the central bank removed a lower repo penalty rate of 5 percent, dealers said.
Actively-traded one-week forwards were steady at 133.60/75 per dollar.
"Everybody is awaiting the results of today's t-bill auction," a currency dealer said on condition of anonymity.
The central bank with effect from Monday removed the lower repo penalty rate of 5 percent, five months after it adopted the measure to boost credit growth.
Central Bank Governor Arjuna Mahendran told Reuters in an interview that the lower penalty repo rate had resulted in volatility in interest rates and he was not expecting the rupee to be under pressure as foreign currency reserves are on the rise, recovering from a sharp fall in January.
Mahendran said the central bank intervention is necessary to maintain stability in the rupee.
Whenever there is a big import bill, the central bank tries and see that it doesn't drag the rupee down substantially, Mahendran said.
"It is not a liquid market. Our job is to see that the currency floats, but floats in a steady manner without any big jerks in either direction."
The spot currency was steady at 132.90/133.20 per dollar for a seventh straight session, keeping to the limits set by the central bank.
The main stock index was up 0.13 percent, or 9.65 points, at 7,253.96 at 0725 GMT, edging up from its lowest close since Feb. 9 hit on Monday.
Turnover was 1.31 billion rupees ($9.85 million).
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