July 8 (Reuters) – The Sri Lankan rupee ended firmer in one-week forwards on Friday, as foreign banks sold dollars on behalf of offshore investors to buy local bonds, dealers said.
The spot rupee is tightly managed by the central bank and market participants use the forward market levels for guidance on the currency.
Dealers said the central bank did not intervene for the fourth straight session since the appointment of the new central bank governor.
The rupee in one-week forwards, which have been acting as a proxy for the spot rupee, ended at 146.00/10 per dollar, stronger than Thursday’s close of 146.15/30.
“Foreign banks sold (dollars) as foreign investors were buying into bonds. There was some late importer demand but rupee ended firmer,” said a currency dealer, asking not to be named.
Another dealer confirmed that foreign investors were buying rupee bonds. The central bank on Friday sold 39.2 billion rupees worth t-bond at auction.
Central bank governor Indrajith Coomaraswamy on Tuesday said the monetary authority would manage exchange rate flexibly and not have too much volatility.
Nandalal Weerasinghe, the central bank deputy governor, said on Tuesday the level of central bank intervention had come down drastically and that it had been absorbing dollars instead of selling.
Both spot rupee and spot-next were not quoted, dealers said.