May 9, 2017 / 8:28 AM / 3 months ago

Sri Lankan rupee firmer in lacklustre trade ahead of holidays

COLOMBO, May 9 (Reuters) - Sri Lankan rupee forwards traded slightly firmer on Tuesday in dull trade due to exporter selling of U.S. currency and inward remittances, while expected dollar inflows from sovereign bonds curbed losses in the local currency, dealers said.

Central Bank Governor Indrajit Coomaraswamy after the monetary policy decision on Tuesday said the central bank does not want to allow the rupee to fall "too quickly" and wants to ensure a competitive exchange rate.

The monetary authority before the markets kept the policy rates steady as expected saying the inflation is expected to decelerate to mid single digit by end 2017.

Rupee forwards were active, with the spot-next trading at 152.70/75 per dollar, as of 0736 GMT, little firmer from Monday's close of 152.80/85. Two-week forwards were at 153.10/20 per dollar unchanged from Monday's close.

The spot rupee, which resumed trading on Friday after four months, was not active on Tuesday, with the central bank's reference rate at 152.10.

Sri Lankan markets will be closed on Wednesday and Thursday to mark a Buddhist religious holiday.

Sri Lanka drew a blowout response in its return to the international bond market, attracting orders of more than $11 billion from 500 accounts for a $1.5 billion 10-year bond.

Coomaraswamy said the sovereign bond inflows are expected by end of this week.

Currency dealers expect higher dollar liquidity from the inflows to help stabilise the rupee.

The country also expects another $1 billion from two separate syndicated loans and the central bank chief said a $450 million syndicated loan is almost decided and the inflows are expected next week.

The central bank has allowed the currency to gradually depreciate since mid-December, revising its spot reference rate multiple times. It has said that defending the currency with foreign exchange reserves did not "seem sensible".

The island nation has seen inflows into equities and government securities since early April.

Sri Lankan shares were down 0.06 percent at 6,663.31 as of 0812 GMT. Turnover stood at 538.2 million rupees ($3.53 million)

$1 = 152.3000 Sri Lankan rupees Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sherry Jacob-Phillips

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