December 17, 2014 / 7:37 AM / 3 years ago

Sri Lankan stocks slip; rupee steady despite importer dlr demand

COLOMBO, Dec 17 (Reuters) - Sri Lankan stocks were slightly weaker on Wednesday in improved volumes as cautious investors continued to be on the sidelines due to political uncertainty ahead of the Jan. 8 presidential poll.

The main stock index was down 0.28 percent, or 20.55 points, at 7,203.01 at 0715 GMT, trading at its lowest since Dec. 1 and heading for its fifth straight fall.

"The index will move sideways until the next month's election. There could be a pre-poll rally if investors see a clear winner in the election," said Danushka Samarasignhe, chief operating officer at Softlogic Stockbrokers.

Analysts said some institutional and foreign investors bought shares in the early trade on Wednesday, boosting the turnover.

Turnover stood at 893.7 million rupees ($6.82 million), with 17.2 million shares changing hands.

Political analysts see a tight race between President Mahinda Rajapaksa and former Health Minister Mithripala Sirisena, the consensus candidate of a united opposition. Both candidates are yet to announce their policies and manifestoes.

Eleven legislators from Rajapaksa's United People's Freedom Alliance, including Sirisena, defected after he announced snap elections last month.

Speculation over more defections at parliament level also weighed on sentiment, analysts said.

Four-day rupee forwards traded steady as the central bank's moral suasion kept the currency flat, despite dollar demand from importers, dealers said.

Dealers said four-day forwards traded steady at 131.99/132.05 per dollar at 0711 GMT, same as Tuesday's close.

"We see imports even in the off season because of lower interest rates and stable exchange rates," a currency dealer said on condition of anonymity.

"Usually December is an off season. But we see some imports which have outpaced remittances from abroad. We see some pressure on the local currency due to the imports and private sector borrowing as well."

The spot currency and three-day forwards, or spot-next, were not traded after the central bank capped the currency at predetermined levels to prevent volatility.

Central bank officials were not available for comment. ($1 = 131.0500 Sri Lankan rupees) (Reporting by Shihar Aneez; Editing by Gopakumar Warrier)

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