REUTERS: The Sri Lankan rupee ended slightly weaker in dull trade yesterday due to mild importer dollar demand, but the fall was capped as dealers were reluctant to trade below 145.60 levels fearing intervention by the Central Bank, dealers said.
The rupee gained last week as foreign investors sold dollars to buy local shares, expecting better profits from corporates on hopes that the latest rate hike would help improve the island nation’s macro-economic outlook. The spot rupee ended at 145.60/75 per dollar, compared with Friday’s close of 145.55/65. Dealers said there was mild importer dollar demand and that no bank wanted to trade below 145.60 levels on concerns over the Central Bank’s moral suasion, though the Central Bank was not seen in the market.
The spot rupee is usually managed by the Central Bank, and market participants use the forward market levels for guidance on the currency.
Since a US $ 1.5 billion inflow from a duel-tenure sovereign bond issue, the Central Bank has largely not intervened in the currency market to defend the rupee. The Central Bank officials were not available for comments.
One-week rupee forwards ended at 145.93/97 per dollar, compared with Friday’s close of 145.80/90.
The Central Bank on July 28 raised its main interest rates by 50 basis points each in a surprise move aimed at curbing stubbornly high credit growth that is adding to concerns about inflationary pressures.
Foreign investors have bought Rs.63.7 billion worth of government securities, since the International Monetary Fund (IMF) agreed to a US $ 1.5-billion bailout package, from April 29 through August 3, the Central Bank data showed.