COLOMBO, June 19 (Reuters) - The Sri Lankan rupee fell for a second straight session on Thursday as dollar demand from importers picked up, and dealers said the central bank intervened in the market to curb excess volatility.
The rupee ended at 130.30/35 per dollar, weaker from Wednesday’s close of 130.26/30. On Tuesday, it hit a near one-year high of 130.22/26.
“There is importer demand. But the moral suasion did not allow any trade above 130.30,” said a currency dealer asking not to be named.
A central bank official at the International Operations Department, however, said there was no moral suasion.
“The rupee is trading between 130.20 and 130.30, and we haven’t seen any excess volatility. If there is any excess volatility we will not allow that,” the official said.
The central bank said on Wednesday it had absorbed around $550 million from the domestic foreign exchange market this year.
The bank said in its monetary policy statement on Wednesday that it did not see much demand for imports in April, while private sector credit growth contracted 3.3 percent year-on-year in the same month, its worst performance since January 2010.
The rupee traded steady or firmer till early trade on Wednesday before import demand picked up.
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; Editing by Anand Basu)