September 1, 2016 / 12:10 PM / 3 years ago

Sri Lankan rupee ends firmer on bank dollar sales

COLOMBO, Sept 1 (Reuters) - The Sri Lankan rupee ended firmer on Thursday as dollar sales by banks on behalf of foreign investors to buy government securities surpassed the importer dollar demand, dealers said.

The spot rupee ended at 145.50/57 per dollar, a tad firmer from Wednesday’s close of 145.55/60, while one-week rupee forwards ended at 145.65/70 compared to 145.75/80.

“There was (dollar) selling, foreigners were buying bonds,” a currency dealer said, asking not to be named.

After leaving the key policy rates steady, Central Bank Governor Indrajith Coomaraswamy said on Tuesday that the currency was not under upward pressure as capital inflows had not been of sufficient magnitude to exert such pressure.

Dealers said the rupee could appreciate if the central bank does not buy the U.S. dollar from the market since capital inflows into government securities have started, and also due to $1.5 billion sovereign bond inflows.

The central bank had absorbed a net $600 million from the market since the International Monetary Fund (IMF) approved a $1.5 billion, three-year loan in June, Coomaraswamy had said.

Dealers said the central bank was not seen intervening in the market to defend the currency. Central bank officials were not available for comment.

The spot rupee is usually managed by the central bank and market participants use the forward market levels for guidance on the currency.

The central bank has largely not intervened to defend the rupee ever since a dual-tenure sovereign bond issue raised $1.5 billion in July.

Net foreign inflows into government securities jumped 31.4 percent to 302.4 billion rupees ($2.08 billion) through Aug. 24, according to the latest central bank data, since the IMF loan approval. (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Vyas Mohan)

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