COLOMBO: The Sri Lankan rupee ended steady on Wednesday due to sustained moral suasion by the central bank, even as the International Monetary Fund asked the island nation to show more flexibility on exchange rates.
"Intervention should be limited to dealing with excessive short-term volatility.
The exchange rate does not appear out of line with fundamentals, particularly given the projected improvement in the balance of payment," said Todd Schneider, the mission head of the IMF's post-aid programme.
The IMF also stressed on the need for a foreign exchange reserves cushion during a series of meetings with top officials dealing with the country's economic policy, Schneider said.
Actively-traded one-week forwards ended steady at 133.60/75 per dollar.
"The central bank did not allow dealers to trade one-week forwards above 133.65. We expected the downward pressure on the rupee to ease after the interest rates went up," said a currency dealer, adding the currency was still under stress.
Central bank officials were not immediately available for comment.
Sri Lanka's Central Bank Governor Arjuna Mahendran told Reuters in an interview on Tuesday that he did not expect the rupee to be under pressure as foreign currency reserves were on the rise, recovering from a sharp fall in January.
Mahendran also said central bank intervention was necessary to maintain the rupee's stability since the currency was thinly traded.
The spot currency was steady at 132.90/133.20 for an eighth straight session, well within the limits set by the central bank. Sri Lanka's stock and currency markets will be closed on Thursday for a Buddhist religious holiday. Normal trading will resume on Friday.
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