Aug 30, 2016 (Reuters) – The Sri Lankan rupee traded steady on Tuesday ahead of a central bank policy meeting later in the day, as exporter dollar sales offset mild importer demand for the greenback, dealers said.
The central bank is expected to keep its key interest rates steady at the monetary policy rate meeting, after raising them by 50 basis points last month, a Reuters poll showed, amid signs of easing inflation and slower private sector credit growth.
The spot rupee was steady at 145.60/65 per dollar at 0719 GMT, while one-week rupee forwards were at 145.70/75, compared with the previous close of 145.75/85.
“Though there is not much of importer demand. The little demand was met by exporter conversions,” a dealer said, asking not to be named.
“Foreign investors also were buying government securities.”
Another dealer said the market has priced in the central bank’s expected policy rate decision, which will be announced at 1230 GMT.
Dealers said the central bank was not seen intervening in the market. Officials from the central bank were not available to comment on whether it had stopped giving directions on the spot rate.
The spot rupee is usually managed by the central bank, and market participants use the forward market levels for guidance on the currency.
Dealers said importers are waiting for the rupee to settle amid upward pressure after Sri Lanka sealed its largest syndicated facility by increasing its three-year borrowing to $700 million from a targeted size of up to $500 million.
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 since the International Monetary Fund approved a three-year, $1.5 billion loan on June 4, according to the latest central bank data.
Meanwhile, Sri Lankan shares edged up, with the benchmark Colombo stock index climbing 0.15 percent at 6,550.65 as of 0727 GMT. Turnover stood at 326.7 million rupees ($2.24 million).