REUTERS: Sri Lankan rupee forwards closed marginally lower yesterday on importer dollar demand, but the fall was capped due to moral suasion by the Central Bank, dealers said. The local currency could weaken further if the government increases spending to deal with the country’s worst natural disaster since 2004, they added.

 The cost of landslides and floods, caused by days of torrential rain, will be between US $ 1.5 billion and US $ 2 billion at the minimum, the government said last week. Dollar/rupee forwards, known as spot next, ended at 148.25/40 per dollar, a tad weaker than Tuesday’s close of 148.20/30. Spot next, which acts as a proxy for the spot currency, indicates the exchange rate for the day following conventional spot settlement, which is five days ahead for yesterday’s trade.

“The demand (for dollar) was there, the spot next traded in between 148.25 and 148.35,” a currency dealer said. The Central Bank officials were not available for comment. Two state-run banks, through which the Central Bank usually directs the market, at times sell dollars to curb falls in the rupee