April 29, 2014 / 12:05 PM / 3 years ago

Sri Lankan rupee weaker on importer dollar demand

COLOMBO, April 29 (Reuters) - The Sri Lankan rupee ended a tad weaker on Tuesday due to importer dollar demand, while dealers expect the currency to remain stable in the near term in the absence of a pick-up in private sector credit.

The spot rupee ended at 130.61/63 per dollar, compared with Monday's close of 130.59/61.

"A state bank bought dollars, to meet its importer (dollar) demand, possibly to cover oil bills," said a currency dealer.

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 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 range of 130.60-70 in the near future until credit growth picks up. It 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 Subhranshu Sahu)

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