June 13, 2014 / 6:42 AM / in 4 years

Sri Lanka rupee steady on state banks' dollar-buying; stocks up

COLOMBO, June 13 (Reuters) - The Sri Lankan rupee traded steady near a one-year high on Friday with state banks buying dollars to prevent sharp gains as greenback sales by banks and exporters outpaced thin dollar demand from importers, dealers said.

The rupee was at 130.25/26 per dollar at 0627 GMT, its highest since June 28, 2013, and little changed from Wednesday’s close of 130.25/27.

Both the rupee and stock markets were closed on Thursday for a public holiday.

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

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

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 last 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’s intervention has prevented gains in the currency and they expect the local currency to face upward pressure until credit growth and imports pick up.

Sri Lanka’s main stock index was up 0.5 percent, or 31.69 points, at 6,325.05 as of 0631 GMT. Turnover was 504.1 million rupees ($3.87 million), with 20.2 million shares changing hands.

$1 = 130.2500 Sri Lankan rupees Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair

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