COLOMBO: The Sri Lankan rupee closed at a record low on Tuesday as dollar demand from importers weighed on the local currency and as investors waited for the central bank's decision on interest rates, dealers said.
Sri Lanka's central bank is expected to raise rates by 25 basis points from record lows at its policy meeting on Wednesday, a Reuters poll found, a move that could relieve pressure on the fragile rupee.
The rupee closed at 143.95/144.05 per dollar, down from Monday's close of 143.90/144.
"A private bank sold dollars to prevent further depreciation. But we don't know if it was done due to central bank direction or a genuine exporter conversion," a currency dealer said on condition of anonymity.
Officials at the central bank were not available for comment.
The currency has fallen 6.4 percent since the central bank allowed free float of the rupee on Sept. 4, and it is expected to weaken further in 2016 due to lower reserves and higher imports, say currency dealers.
The rupee has fallen 8.9 percent so far in the year.
The currency may however strengthen if foreign exchange inflows increase, dealers said.
Finance Minister Ravi Karunanayake told Reuters last week that Sri Lanka is expected to get $1 billion from offshore investors within a month, a move that could boost the island nation's faltering reserves.
Commercial banks parked 78.2 billion rupees ($543.43 million) of surplus liquidity on Tuesday using the central bank's deposit facility at 6 percent, official data showed.
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