May 5, 2014 / 11:21 AM / 3 years ago

Sri Lankan rupee ends steady; seen stable until imports, credit pick up

COLOMBO, May 5 (Reuters) - The Sri Lankan rupee ended steady on Monday as thin importer dollar demand offset exporter dollar sales, while dealers expect the local currency to be stable in the near term until private sector credit demand and imports pick up.

The spot rupee ended at 130.60/61 per dollar, little changed from Friday's close of 130.60/65.

"We are seeing an appreciation trend. Inflows are steady and we do not see encouraging import demand," said a currency dealer.

Dealers said the central bank can defend the currency with its strong reserves, with falling imports and slowing credit growth.

The latest trade data released by the central bank on Monday showed imports in February fell 6.2 percent, while exports edged up 5.4 percent.

Despite a multi-year low interest rate regime, private sector credit grew 4.4 percent in February from a year earlier, the slowest expansion since May 2010. That compared with growth of 5.2 percent in January and 13.3 percent in February 2013.

Dealers said the lack of credit expansion and contraction in the imports could hit the economic growth unless the government prop up the 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.

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 Shihar Aneez and Ranga Sirilal; Editing by Anand Basu)

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