June 11, 2014 / 11:31 AM / in 4 years

Sri Lanka rupee edges up as state banks lower dollar-buying rate

COLOMBO, June 11 (Reuters) - The Sri Lankan rupee edged up to hit a near one-year high on Wednesday as dollar sales by banks and exporters surpassed thin dollar-demand from importers, while state banks lowered their rate for buying the greenback to prevent any sharp gains.

The rupee ended at 130.25/27 per dollar, its highest since June 28, 2013 and firmer from Tuesday’s close of 130.26/28 per dollar.

Dealers said exporter dollar sales picked up on expectations that the local currency would strengthen further.

The two state banks, through which the central bank intervenes to direct the market, bought dollars at 130.25 rupees, a cent below previous day’s rate as the central bank allowed a gradual appreciation in the local currency to prevent shocks, dealers said.

The central bank bought dollars at 130.35 rupees on May 30 and started lowering its buying rate since then, allowing a gradual appreciation.

Central bank Governor Ajith Nivard Cabraal told Reuters on Friday that the rupee was facing some appreciation pressure and the bank was allowing the trend on a gradual basis to let all stakeholders adjust to the changes.

He had said earlier that the central bank would keep intervening in the currency market to prevent a rapid rise in the rupee. The central bank has absorbed over $400 million as of May 27 to prevent a sharp gain in the rupee.

Dealers said the central bank intervention has prevented gains in the currency and they expect the local currency to face upward pressure until credit growth and imports pick up. (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anand Basu)

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