COLOMBO May 8 The Sri Lankan rupee ended firmer
on Thursday at its highest level in more than six months after a
state bank reduced its dollar buying bid as the local currency
faced upward pressure in the absence of credit demand and
The rupee closed at 130.50/52 per dollar, its highest
close since Oct. 24 and firmer from Wednesday's close of
Dealers said one of the two state banks, through which the
central bank usually intervenes in the market, stopped buying
the U.S. currency at 130.60 and allowed the market forces to
determine the rupee.
"But later the same bank started to buy dollars at 130.50,
directing the market. The rupee is following most of the other
currencies, which appreciated against the U.S. dollar today,"
said a currency dealer asking not to be named.
Many dealers said the rupee will be under upward pressure
until lower credit growth and imports reverse their trend.
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 expansion.
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 Shihar Aneez; Editing by Anand Basu)