Sri Lanka rupee tad firmer on correction; shares near 5-month high

COLOMBO Wed Jan 8, 2014 12:41am EST

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COLOMBO Jan 8 (Reuters) - The Sri Lankan rupee traded slightly firmer on Wednesday due to a technical correction, dealers said, a day after it fell 0.1 percent despite being under pressure to gain due to expected $1 billion in inflows from a sovereign bond.

The spot rupee was traded at 130.80/88 per dollar at 0519 GMT, slightly firmer from Tuesday's close of 130.80/90.

Dealers said the local currency had a technical correction on Wednesday after the previous session's fall when foreigners bought dollars to exit from rupee bonds.

They said the rupee was under pressure to appreciate, but by how much would depend on what the central bank wanted to do -- whether to buy the inflows to build up its reserves or increase dollar liquidity in the market.

A source close to the sovereign bond deal said the inflows are expected next week.

Sri Lanka sold a $1 billion, five-year sovereign bond at par to yield 6.00 percent.

The central bank on Thursday, while revealing its financial and monetary policies for 2014, said it expected the rupee to strengthen in the medium term and its direct intervention in the foreign exchange market would be minimum.

The local currency has gained about 3.3 percent since it hit a record low of 135.20 on Aug. 28. It lost 2.5 percent in 2013.

At 0524 GMT, Sri Lanka's main stock index was up 0.53 percent at 6,008.52, its highest since Aug. 23. (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Prateek Chatterjee)

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