January 10, 2017 / 6:59 AM / 3 years ago

Sri Lankan rupee marginally up on dollar sales

COLOMBO, Jan 10 (Reuters) - The Sri Lankan rupee traded slightly firmer on Tuesday as foreign banks sold dollars, but dealers expect the strength to be short-lived on lingering concerns after the central bank last week changed its intervention policy in the currency market.

The rupee has been under pressure due to rising imports and net selling of government securities by foreign investors, dealers said.

Rupee forwards were active, with two-week forwards trading at 150.45/55 per dollar at 0632 GMT, slightly firmer from Monday’s close of 150.60/75.

“We see some foreign banks selling dollars, probably from foreign investors to buy local bonds,” a currency dealer said, asking not to be named.

Another dealer said there were some project-related foreign inflows to a foreign bank.

Last week, the central bank’s moral suasion prevented further decline even as the monetary authority signalled a change in its intervention policy.

Officials from the central bank were not available for comments.

Central Bank Governor Indrajith Coomaraswamy said last week that defending the rupee with foreign exchange reserves “doesn’t seem sensible” as it has always been followed by a sharp depreciation in the currency.

The spot rupee was also hardly traded, dealers said.

Sri Lankan shares traded 0.04 percent firmer at 6,158.05 as of 0639 GMT. Turnover stood at 68.2 million Sri Lankan rupees ($455,577.82). ($1 = 149.7000 Sri Lankan rupees) (Reporting by Shihar Aneez and Ranga Sirilal; Editing by Vyas Mohan)

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