Sri Lanka rupee weaker on importer dollar demand; shares falter
COLOMBO Oct 1 (Reuters) - The Sri Lankan rupee was slightly weaker on Tuesday morning due to importer dollar demand, but an earlier central bank direction asking banks not to trade above 132.00 per dollar prevented further falls, dealers said.
However, dealers said the rupee may be steady in the near future on expected dollar weakening due to a possible major shutdown in the U.S. government as last-minute maneuvers failed to resolve deep differences between Democrats and Republicans.
The rupee spot was quoted at 132.00/132.10 at 0550 GMT, compared with Monday's close of 132.00/132.05.
The spot next or three-day forward, which was active in the market, was quoted at 132.13/15 per dollar compared with Monday's close of 132.03/05 per dollar.
"We do not see any reason for the rupee to gain, but the U.S. shutdown could help the central bank keep the rupee steady without much pressure," said a currency dealer.
"The authorities may keep the currency steady at least until the next budget scheduled for late November."
The rupee hit a record low of 135.20 on Aug. 28, but has managed to stem further losses since then. It has fallen 3.3 percent this year, after depreciating about 10 percent in 2012.
Banks have said the central bank had directed them not to trade rupee beyond 132.00 per dollar.
Though Sri Lanka has a floating exchange rate, the central bank usually intervenes during times of sharp volatility through several measures including moral suasion.
Central bank Governor Ajith Nivard Cabraal last month said that moral suasion was in the Monetary Law Act as well as in the banking laws of many countries and central banks were expected to make use of such instruments.
The International Monetary Fund last week urged the central bank to limit its intervention in the rupee exchange rate "to dealing with excessive short-term volatility". "
Sri Lanka's main stock index was down 0.24 percent, or 13.63 points, at 5,789.69 at 0557 GMT. (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)