COLOMBO, Feb 9 (Reuters) - The Sri Lankan rupee ended steady as the central bank prevented any fall on Monday through a combination of moral suasion and lower forward premiums, but the local currency was still under pressure due to importer dollar demand and credit growth.
The spot currency was steady at 132.80/133.00, though it did not trade much because the central bank did not allow it to fall below 132.80, dealers said.
Finance Minister Ravi Karunanayake on Monday told Reuters in an interview that the rupee will be held steady at current level and “there won’t be any devaluation at all”.
Two-month forwards, which were actively traded, ended at 134.05/10 per dollar, as all other forwards ceased trading after the central bank narrowed the per day premium, dealers said.
The central bank, which limited forward premiums at 5 cents per day on Friday, narrowed its limit to 2 cents per day, dealers said.
“The central bank is defending the currency strongly and there is no way people can get dollars easily,” a currency dealer said on condition of anonymity. “There are no dollar sales from exporters.”
Officials from the central bank were not immediately available for comment on the changes it had made to the exchange rate.
The central bank lowered the spot currency trading rate to 132.80 per dollar from 132.20 on Friday amid downward pressure due to higher imports and rising private sector credit in a lower interest rate regime.
Dealers said policy uncertainty weighed on the currency as the government had sent mixed signals on investments, discouraging exporter dollar sales amid continued importer demand. They expect the pressure on the rupee to ease with some equity-related inflows.
The market had been expecting a flexible exchange rate with more foreign grants under the new government as opposed to the controlled exchange rate regime earlier. (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anand Basu)