COLOMBO Jan 9 The Sri Lankan rupee traded firmer on Thursday as a foreign bank sold dollars, while currency dealers said the local currency would gain unless the central bank intervenes to keep it at a particular level.
The spot rupee was traded at 130.73/80 per dollar at 0754 GMT, firmer from Wednesday's close of 130.80/90.
"We saw a foreign bank got some dollars and it was selling them," a currency dealer said.
"A state bank, which has been active in keeping the currency steady, is buying dollars at market rate. But early in the day, it sold dollars at 130.80," the dealer said.
The state bank, through which the central bank directs the market, has defended the rupee throughout this week as the local currency faced downward pressure when foreigners bought dollars to exit rupee bonds.
Dealers said the rupee was under pressure to appreciate in the near future due to the expected inflow from a $1 billion sovereign bond, but by how much would depend on what the central bank wanted to do -- whether to buy the inflows to build up its reserves or increase dollar liquidity in the market.
The inflow from the sovereign bond is expected next week.
The central bank on Jan. 2, while announcing its financial and monetary policies for 2014, said it expects the rupee to strengthen in the medium term and any direct intervention in the foreign exchange market would be minimum.
The local currency has gained about 3.3 percent since it hit a record low of 135.20 on Aug. 28. It lost 2.5 percent in 2013.
At 0800 GMT, Sri Lanka's main stock index was up 0.31 percent or 18.70 points to 6,073.17, its highest since Aug. 22. (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anand Basu)