COLOMBO May 12 The Sri Lankan rupee traded
firmer on Monday at its highest level in more than six months on
stock-related inflows, though one of the two state banks bought
dollars at 130.35 rupees to prevent further appreciation in the
The rupee was at 130.35/37 per dollar, its highest
since Oct. 25, 2013, at 0631 GMT, firmer from Friday's close of
130.42/44. It has gained 0.19 percent in the last three sessions
"The rupee is in the appreciation trend. We don't see FDI's
coming in, but there are inflows like stock-related and other
project-related, putting the appreciation pressure on the
currency," said a currency dealer asking not to be named.
Dealers said one of the state banks, through which the
central bank usually intervenes to direct the market, bought
dollars at 130.35 rupees, 5 cents below the Friday's level.
"It looks like they (central bank) had lowered the range
from 130.40 to 130.35," the dealer said
Central bank Governor Ajith Nivard Cabraal on Friday told
Reuters that the central bank is "giving effect to the present
trend in a gradual manner".
Dealers said steady inflows from remittances and exporter
conversions amid lack of importer dollar demand led to
appreciation in the local currency.
On Thursday, the rupee appreciated 0.08 percent as one of
the two state banks, through which the central bank usually
intervenes in the market, reduced its buying bid and allowed
market forces to determine the level of the rupee. Since then
the currency is appreciating.
Many dealers said the rupee would be under upward pressure
until credit growth and imports reverse their trends.
Despite a multi-year low interest rate regime, latest data
showed private sector credit grew 4.4 percent in February from a
year earlier, the slowest expansion since May 2010, while
imports in February fell 6.2 percent on year.
Dealers said lack of credit expansion and a contraction in
imports could hit economic growth unless the government props up
expansion through infrastructure funding.
The central bank, in its monetary policy statement last
month, however, expressed confidence that private sector credit
growth would rebound in the second quarter and push up the pace
of economic growth.
The currency has hovered between 130.55 and 130.70 since
March 3 through Thursday, Thomson Reuters data showed, with the
central bank intervening to smoothen any sharp volatility.
Sri Lanka's main stock index was up 0.45 percent, or
28.23 points, at 6,313.10 as of 0649 GMT. Turnover was at 500.3
million Sri Lanka rupees ($3.84 million), with 29.9 million
shares changing hands.
Stockbrokers said many investors have been compelled to
return to stock market due to multi-year low interest rates,
which has made fixed-income assets less attractive.
($1 = 130.4000 Sri Lanka Rupees)
(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anand