Sri Lanka rupee up on state bank dollar sales
COLOMBO Oct 17 (Reuters) - The Sri Lankan rupee was trading firmer on Thursday due to dollar sales by a state-run bank, but dealers said the currency was still under downward pressure after the central bank cut key policy interest rates to multi-year lows.
The spot rupee was trading at 131.10 per dollar at 0610 GMT, compared with Tuesday's close of 131.16/25. Markets were closed on Wednesday for a holiday.
"A state bank is selling dollars at 131.10 and the market has adjusted to that level," a currency dealer said on condition of anonymity. Two other dealers confirmed the state bank's dollar sale at 131.10 rupee.
The central bank on Tuesday cut key policy interest rates to spur economic growth, just three weeks after the International Monetary Fund advised it to hold rates steady. Currency dealers, however, expect the decision to put the rupee under downward pressure.
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 future.
Dealers had earlier expected the local currency to be stable and trade in a narrow range in the short term after the central bank governor said on Oct. 4 that the currency would "behave in a stable manner" in the next few months.
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 currency basket, slipped to 80.263, pulling back from a one-month high of 80.745.
Sri Lanka's main stock index was up 0.13 percent, or 7.85 points, at 5,969.83 at 0617 GMT. (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anand Basu)
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