UPDATE 1-S.Lanka cenbank says will keep protecting rupee

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By Shihar Aneez

COLOMBO, Oct 10 (Reuters) - Sri Lanka's central bank will keep protecting the rupee against the U.S. dollar to maintain stability amid an unprecendented global financial crisis, Central Bank Governor Ajith Nivard Cabraal said on Friday.

The central bank has been blocking the local currency's fall by pumping over $250 million into the market since early September through a state-owned bank at a level of 108.00 rupees to the dollar, analysts and currency dealers said.

Most dealers said it would have fallen to 109.00 barring the intervention. "We are looking at stability," Cabraal told Reuters. "We are still within our limits of interventions. The central bank is taking steps which are long-term, which have impact on long-term stability. This is one of such actions."

Cabraal gave no deadline to stop intervention, but said a stabilised rupee level would govern the decision.

In the past he has said the bank would step in to prevent rapid fluctuations, and said the move was no different than what other central banks were doing now.

"We are looking after Sri Lankan stability in this global turmoil that is taking place," he said. "The Federal Reserve is today giving unsecured loan to the market. The Bank of England is giving money to 12 banks, so that they can recapitalise."

Dealers were critical of the intervention, saying the central bank should let the currency move on its own accord to balance the needs of importers and exporters.