Sri Lankan rupee ends steady as state bank buys dollars

COLOMBO Fri Jan 3, 2014 7:32am EST

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COLOMBO Jan 3 (Reuters) - The Sri Lankan rupee ended steady on Friday after a state bank bought dollars to prevent appreciation due to inflows, dealers said, a day after the central bank said it expected the rupee to gain in the medium term.

The spot rupee closed at 130.70/75 per dollar, hovering around its highest close since Oct. 25.

"A state bank bought dollars at 130.70 rupees to cap any appreciation," a currency dealer said on condition of anonymity.

The central bank usually directs the market through two state banks.

Revealing its financial and monetary policies for 2014, the central bank said it expects the rupee to strengthen in the medium term and its direct intervention in foreign exchange market would be minimum.

Dealers said the bond market was active after the central bank slashed the standing lending facility rate or reverse repurchase rate by 50 basis points to a multi-year low of 8 percent on Thursday, in a move to reduce commercial banks' interest rate spreads.

Dealers expect the currency to appreciate in the first quarter of 2014 due to possible dollar bond inflows.

The local currency has gained about 3.4 percent since it hit a record low of 135.20 on Aug. 28. It lost 2.5 percent in 2013 following a 10.7 percent depreciation in 2012. (Reporting by Shihar Aneez; Editing by Prateek Chatterjee)

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