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Sri Lankan rupee down on importer dollar demand; cenbank caps fall

COLOMBO, Oct 7 (Reuters) - The Sri Lankan rupee fell on Friday due to importer dollar demand while moral suasion by the central bank on the spot-currency trade forced banks to deal in spot-next, dealers said. "Banks did not trade the spot rupee below 146.
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85 because of moral suasion," a currency dealer said, asking not to be named. "We see a state bank selling dollars for spot rupee at 146.90 and then at 146.85 for selective buyers." The spot rupee was quoted at 146.85 per dollar at 0604 GMT, but there was hardly any trade, dealers said. It closed at 146.88/95 on Thursday. Rupee forwards were active, and the spot-next was at 147.02/05, compared with the previous day's close of 146.90/97, dealers said. The market expects the local currency to be under pressure due to seasonal demand from importers until the year-end. Dealers say foreign buying into government securities has slowed with the fall in interest rates while the central bank has been buying dollars from the market to accumulate reserves to meet the targets set by the International Monetary Fund under a $1.5 billion loan deal. Officials at the central bank were not available for comment. The central bank has been under pressure from the (IMF) to continue rebuilding international reserves and maintain exchange rate flexibility to develop the foreign exchange market further. Usually the central bank intervenes whenever there is volatility. The rupee has been under pressure due to importer dollar demand, posting a 0.65 percent decline last week. Finance Minister Ravi Karunanayake said on Monday the government wanted a strong currency through higher foreign inflows and without interventions. Sri Lankan shares were up with the benchmark Colombo stock index 0.32 percent higher at 6,588.06 as of 0611 GMT. Turnover was at 192.2 million rupees ($1.31 million). ($1 = 146.6000Sri Lankan rupees)
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