COLOMBO, July 29 (Reuters) - The Sri Lankan rupee ended slightly weaker on Friday due to importer dollar demand, a day after the central bank surprisingly raised key policy rates, dealers said.
After market hours on Thursday, the central bank raised its main interest rates by 50 basis points each in a surprise move aimed at curbing stubbornly high credit growth that is adding to concern about inflationary pressures.
The central bank governor said on Friday the nation’s economy can still grow 5 percent or slightly faster this year even after increases in monetary policy rates.
One-week rupee forwards, which have been acting as a proxy for the spot rupee, ended at 146.20/23 per dollar, weaker than Thursday’s close of 146.10/25.
The spot rupee is tightly managed by the central bank, and market participants use the forward market levels for guidance on the currency.
“There is no impact of the rate hike. Technically, the currency should strengthen when interest rates go up. But that is not happening here,” said a currency dealer, asking not to be named.
The rupee is under pressure due to importer dollar demand, and dealers said the market has shrugged off speculation of a strong rise in the rupee as the island nation’s heavy debt repayment reduced dollar availability for the central bank to defend the currency.
The spot rupee was not traded on Friday.
Spot-next, which are rupee forwards settled a day after the spot rupee settlement, ended at 146.05/15 per dollar, compared with Thursday’s close of 145.95/10.
$1 = 145.9500 Sri Lankan rupees Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sherry Jacob-Phillips