COLOMBO: The Sri Lankan rupee ended 0.8 percent firmer on Thursday as exporters converted dollars, fearing the local currency could appreciate heavily after a warning by the island nation's treasury secretary.
The rupee ended at 126.90/127.00 against the dollar, up from Wednesday's close of 127.70/128.20.
The currency has gained 2.6 percent in the last two sessions since the treasury secretary warned of resume market intervention if the currency dropped beyond "tolerable" levels.
"The market expects the rupee to appreciate further because of expected inflows," a dealer said.
Treasury Secretary P.B. Jayasundera on Monday said the currency should stabilize below 125 rupees and there was no fundamental reason for it to weaken beyond that level.
The currency hit an all-time low of 133.50 on April 25, but has since rebounded by 5.15 percent.
Still, it is down 9.96 percent since the central bank stopped intervening to defend a specific price level on Feb. 9. It has depreciated 13 percent since Nov. 19, when the government allowed a 3 percent devaluation.
The stock market fell below a support level of 5,400 points, losing 0.51 percent, or 27.70 points, to 5,389.47 with investors worried about the rupee's volatility, rising interest rates and slowing economic growth.
The day's turnover was 470.2 million rupees ($3.67 million), well below this year's daily average of 1.2 billion rupees.
The market saw a foreign inflow of 103.9 million rupees extending the net foreign inflow so far this year to 21.4 billion rupees.
The Colombo bourse is one of the worst performing Asian markets this year, losing 11.28 percent so far.