Sri Lanka rupee slips after cbank cuts rates; dealers expect downward pressure
COLOMBO Oct 15 (Reuters) - The Sri Lankan rupee fell on Tuesday from a three-month high in the previous session due to importer dollar demand after the central bank surprised markets by cutting key policy interest rates to multi-year lows.
The local currency could come under further pressure as investors may start selling government bonds because of lower returns, dealers said.
The spot rupee ended at 131.16/25 per dollar, weaker from Monday's close of 130.90/95, which was its highest since July 16.
Earlier on Tuesday, the central bank cut key policy interest rates by 50 basis points in a surprise move to spur economic growth, just three weeks after the International Monetary Fund advised it to hold rates steady.
Currency dealers said there would be a lot of pressure on the exchange rate if big investors take away their money due to lower returns.
However, Central Bank Governor Ajith Nivard Cabraal said the rate-cut decision was taken after considering the stability in the exchange rate and favourable inflation outlook in the near term.
Both the currency and the stock markets will be closed for holidays on Wednesday and Friday.
The rupee hit a record low of 135.20 on Aug. 28, but has managed to stem further losses since then.
The dollar index, which tracks the greenback's performance against a basket of major currencies, was up about 0.1 percent, moving away from an eight-month low hit after the U.S. government's shutdown started earlier this month. (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Prateek Chatterjee)
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