COLOMBO, Jan 6 (Reuters) - The Sri Lankan rupee traded steady on Monday in dull trade as a state-run bank bought dollars to prevent any appreciation in the currency due to inflows, dealers said.
The spot rupee was trading unchanged at 130.70/75 per dollar at 0518 GMT compared with Friday's close.
"The rupee will appreciate in the absence of a state bank. But it is not moving as a state bank bought dollars at 130.70 rupees to cap any appreciation," a currency dealer said on condition of anonymity.
The central bank usually directs the market through two state-run banks.
Revealing its financial and monetary policies for 2014, the central bank on Thursday said it expects the rupee to strengthen in the medium term and its direct intervention in foreign exchange market would be minimum.
The central bank on Thursday slashed the standing lending facility rate or reverse repurchase rate by 50 basis points to a multi-year low of 8 percent, in a move to reduce commercial banks' interest rate spreads.
Dealers expect the currency to appreciate in the first quarter of 2014 due to possible dollar bond inflows.
Sri Lanka issued price guidance on Monday at 6.25 percent area for an offering of new five-year 144A/Reg S US dollar-denominated bonds.
The local currency has gained about 3.4 percent since it hit a record low of 135.20 on Aug. 28. It lost 2.5 percent in 2013 following a 10.7 percent depreciation in 2012.
At 0549 GMT, Sri Lanka's main stock index was down 0.26 percent, or 15.42 points, at 5,958.38, slipping from its highest close since Oct. 17. (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anand Basu)