Sri Lanka rupee steady; downward pressure seen from Jan
COLOMBO Dec 26 (Reuters) - The Sri Lankan rupee was steady near its two-month closing high on Thursday as mild importer dollar demand was offset by inward remittances, but dealers expect downward pressure on the currency from January.
The spot rupee was at 130.70/75 per dollar at 0655 GMT, near Tuesday's close of 130.72/75 and hovering around its highest close since Oct. 25. Both currency and share markets were closed on Wednesday for Christmas.
Dealers said one of the two state-run banks, through which the central bank usually directs the market, bought dollars at 130.70 per rupee.
"The rupee could be under pressure from the new year if the demand for loans does not grow even after the central bank had reduced interest rates to lower levels," a currency dealer said on condition of anonymity.
The central bank cut the key monetary policy interest rate by 50 basis points in October and has slashed them by 125 basis points since December 2012 to multi-year lows, while yields on treasury bills dropped to their lowest since November 2011 at last week's auction.,
However, private sector credit growth, which fell to 7.4 percent year-on-year in October from 7.6 percent in the previous month, has yet to pick up in line with the reduction in interest rates.
"The exchange rate will be under pressure if there is no demand for the rupee. I think people and companies are not borrowing because of the confidence factor after the rise in indirect and direct taxes in the budget," the dealer said.
The rupee has been facing upward pressure since mid-November as expatriates send money for their families ahead of Christmas and New Year.
The rupee has gained about 3.4 percent since it hit a record low of 135.20 on Aug. 28.
At 0710 GMT, Sri Lanka's main stock index was up 0.23 percent, or 13.44 points, at 5,859.37. (Reporting by Shihar Aneez; Editing by Sunil Nair)
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