COLOMBO, Oct 30 (Reuters) - The Sri Lankan rupee strengthened on Wednesday, edging up from a near two-week low as banks sold dollars, but downward pressure on the currency is expected in the near term because of seasonal and project-related imports, dealers said.
Some dealers said a state bank, through which the central bank usually directs the market, was seen selling dollars at 131.10 rupees.
The spot rupee traded at 131.05/15 per dollar by 0458 GMT, firmer than Tuesday’s close of 131.10/20 per dollar, its lowest close since Oct. 17.
“We see a cap at 131.10 per dollar. A state bank sold dollars at 131.10 and we will not see a huge depreciation unless the cap is removed,” said a currency dealer who asked not to be named.
The currency, which appreciated 0.4 percent last week on foreign buying in the rights issue of John Keells Holdings Plc , hit a near four-month closing high last week.
The rupee hit a record low of 135.20 on Aug. 28, but has managed to stem further losses and is up 3.12 percent since then.
Sri Lanka’s main stock index was trading 0.25 percent, or 14.68 points up, at 5,921.21 as of 0511 GMT. (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anupama Dwivedi)