COLOMBO: The Sri Lankan rupee fell to an all-time low of 142.50 per dollar on Tuesday due to importer dollar demand ahead of the budget, but the central bank's moral suasion prevented a further fall in the currency, dealers said.
The currency fell 0.35 percent, surpassing its previous low of 142.25 hit on Friday. The central bank restricted trades below 142.50 per dollar, dealers said.
The rupee ended at 142.33/40 per dollar, weaker from Monday's close of 142.20/30.
"The demand (for dollars) was greater (from importers). Exporters are awaiting and they are very reluctant to sell," said a currency dealer asking not to be named.
The central bank was not happy with the currency being traded below 142.50 and its officials requested banks to give reasons if anybody had quoted below 142.50, the dealer said.
Officials at the Central Bank of Sri Lanka were not available for comments.
The central bank was still intervening in the market to prevent the fall in the rupee, dealers said.
Latest data showed the central bank had sold a net $277.95 million in October and $523.80 million worth dollars in September. Dealers said part of that money was spent to defend the rupee.
"Steep depreciation will increase the import inflation given Sri Lanka is a import-depend nation. So you have to defend the currency when it is falling sharply," a finance ministry official told Reuters on condition of anonymity.
The rupee has fallen 7.96 percent so far this year and 5.44 percent since the central bank allowed free float on Sept. 4.
Dealers said importers have been booking forwards as they are not sure of the budget while exporters are quietly selling in low volumes on expectations the currency will trade around the current levels until some clarity emerges from the 2016 budget.
Finance Minister Ravi Karunanayake will present the 2016 budget in parliament on Friday. He has said the budget will be "capital oriented".
Commercial banks parked 140 billion rupees ($984.5 million) of surplus liquidity on Tuesday, using the central bank's deposit facility at 6 percent, official data showed.
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