May 22, 2014 / 7:07 AM / 4 years ago

Sri Lanka rupee steady despite upward pressure; stocks slip

COLOMBO, May 22 (Reuters) - The Sri Lanka rupee was steady on Thursday as importer dollar demand offset 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 was traded at 130.33/36 per dollar at 0654 GMT, little changed from Wednesday’s close of 130.34/36.

“There were some inflows in the morning. But with importer dollar demand, the rupee is flat,” 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.

Sri Lanka’s main stock index was down 0.11 percent, or 7.14 points, at 6,282.18 points by 0655 GMT. Turnover was at 328.5 million rupees ($2.52 million), with 9.7 million shares changing hands.

Stockbrokers said many investors had been compelled to return to the market due to the low interest rates that have made fixed-income assets less attractive. ($1 = 130.3650 Sri Lanka rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)

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