COLOMBO, May 22 (Reuters) - The Sri Lanka rupee edged down on Thursday as late importer dollar demand outpaced greenback inflows, but dealers expect the currency to face upward pressure due to steady inflows in the absence of strong demand for imports and credit.
The rupee ended at 130.35/38 per dollar, a tad weaker from Wednesday’s close of 130.34/36.
“There was some import demand,” said a currency dealer.
The central bank has been preventing the rupee’s appreciation over the last few weeks due to steady inflows amid slack demand for private sector credit and imports.
Despite a multi-year low interest rate regime, data on Monday showed private sector credit grew at a four-year low of 4.3 percent in March from a year earlier, while imports in February fell 6.2 percent on the year.
While maintaining the policy rate for the fourth straight month on Tuesday, Sri Lanka’s central bank said it expected to introduce a new guarantee scheme for gold loans to boost credit growth that hit a four-year low in March.
Dealers expect the rupee to face upward pressure until credit growth and imports reverse the trend.
On Monday, central bank governor Ajith Nivard Cabraal said private sector credit growth would pick up to around 15 percent by end-2014 and continue to improve through 2016. (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)