Sri Lankan rupee weaker in importer dollar demand; seen steady

COLOMBO Fri May 2, 2014 8:03am EDT

COLOMBO May 2 (Reuters) - The Sri Lankan rupee ended weaker on Friday due to light importer dollar demand in dull trade, but dealers expect the currency to be stable in the near term as private sector credit demand remained sluggish.

The spot rupee ended at 130.60/65 per dollar, weaker from Wednesday's close of 130.61/63.

"We have seen light importer demand," said a currency dealer.

Both the stock and foreign exchange markets were closed on Thursday for May Day, a public and bank holiday.

Lower credit demand from the private sector, even though key interest rates have been at multi-year lows since January, has surprised dealers.

At an auction on Tuesday, the central bank rejected all bids for the benchmark 91-day treasury bills with yields already at their lowest since January 2007, data showed.

Last week, the central bank kept policy rates steady at multi-year lows.

Private sector credit grew 4.4 percent year-on-year in February, the slowest since May 2010, latest data from the central bank showed. That compared with a growth of 5.2 percent in January this year and 13.3 percent in February 2013.

The central bank, in its monetary policy statement last week, expressed confidence that private sector credit growth would rebound in the second quarter and push up the pace of economic expansion.

Dealers expect the rupee to trade in a 130.60-130.70 range in the near future until credit growth picks up. The currency has been hovering between 130.55 and 130.70 since March 3, Thomson Reuters data showed, with the central bank intervening to smoothen any sharp volatility. (Reporting by Ranga Sirilal; Editing by Anand Basu)

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