COLOMBO, June 20 (Reuters) - The Sri Lankan rupee ended firmer on Friday after two days of falls as inward remittances outpaced importer dollar demand, while dealers expected the local currency to remain stable on lower imports and gains in exports.
The rupee ended at 130.26/31 per dollar, firmer from Thursday’s close of 130.30/35.
Dealers said the rupee could be under pressure if the United States takes any action against Sri Lanka importing Iranian crude via a third party.
Sri Lanka’s Media Minister and government spokesman Keheliya Rambukwella on Thursday said the island nation has been buying Iranian crude from various countries via third parties, and avoiding sanctions with the understanding of the United States. The U.S. denied the claim.
Dealers said the currency is on an appreciation trend.
Exports in April rose 9.4 percent year-on-year while imports fell 5.3 percent, data from the central bank showed.
“So we see a stable rupee until the trend in external trade continues and credit growth remains low,” the dealer said.
The rupee has remained relatively stable against the dollar, marginally appreciating by 0.40 percent during the year up to June 19, the central bank said in its April trade data statement on Friday.
The central bank had absorbed around $550 million from the domestic foreign exchange market this year through June 17.
Private sector credit growth contracted 3.3 percent year-on-year in April, its worst performance since January 2010, compared to a 4.3 percent growth in March.
The central bank bought dollars at 130.35 rupees on May 30 but started reducing its buying since then, allowing a gradual appreciation in the rupee.
Central bank Governor Ajith Nivard Cabraal told Reuters on June 6 that the rupee was facing appreciation pressure. The bank was condoning the trend on a gradual basis to allow all stakeholders to adjust to the changes.
Cabraal had said earlier that the central bank would keep intervening in the currency market to prevent a rapid rise in the rupee.
Dealers said the central bank’s intervention has prevented gains in the currency and they expect the rupee to face upward pressure until credit growth and imports pick up. (Reporting by Shihar Aneez and Ranga Sirilal; Editing by Sunil Nair)