REFILE-Sri Lanka rupee weaker on importer dlr demand; index slips from 5-month high

Fri Jan 17, 2014 2:02am EST

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(Corrects to add dropped word 'rupee' in headline)

COLOMBO Jan 17 (Reuters) - The Sri Lankan rupee traded slightly weaker on Friday due to importer dollar demand, but the market expects the local currency to strengthen in the near future due to inflows from a sovereign bond sale.

Some dealers said investors awaiting to see the impact of the expected inflows from a $1 billion sovereign bond issue.

The spot rupee was traded at 130.65/72 per dollar at 0545 GMT, weaker from Thursday's close of 130.60/67.

"The rupee is weaker as few payments went out and it's nothing big. But we are awaiting to see the impact of the bond inflow," said a dealer.

The rupee is likely to appreciate after the bond issue, dealers said. However, gains would depend on whether the central bank wants to buy the inflows to build up its reserves or increase dollar liquidity in the market.

The central bank said on Jan. 2 it expected the rupee to strengthen in the medium term and any direct intervention in the foreign exchange market would be minimum.

The rupee has gained about 3.5 percent since it hit a record low of 135.20 on Aug. 28. It lost 2.5 percent in 2013.

Sri Lanka's main stock index fell 0.26 percent to 6,150.83, slipping from a near five-month high hit on Thursday. (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Prateek Chatterjee)

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