March 10, 2017 / 12:30 PM / 5 months ago

Sri Lankan rupee ends slightly weaker in dull trade

COLOMBO, March 10 (Reuters) - The Sri Lankan rupee ended slightly weaker on Friday in dull trade as importer dollar demand surpassed exporter greenback sales, a day after the central bank's moral suasion curbed further decline, dealers said.

Rupee forwards were active, with two-week forwards ending at 152.25/45 per dollar, compared with Thursday's close of 152.20/30.

"We didn't see much of activity and the (inward) remittances were also very low, though there were some import demand," said a currency dealer on condition of anonymity.

Another dealer said the trading was light after Thursday's moral suasion reversed some deals.

Central bank officials were not available for comment.

International Monetary Fund on Wednesday urged the country's central bank to rebuild foreign reserves while maintaining exchange rate flexibility.

Following its second review of a $1.5-billion three-year loan programme, the IMF said it had discussed with Sri Lankan authorities the need to push forward with reforms due to an uncertain external environment.

Dealers expect the rupee to depreciate between 6 percent and 8 percent this year.

Analysts said inflow from up to $1.5 billion sovereign bond issue sooner than later could help ease some pressure on the currency.

Sources who know about the bond deal said top central bank officials have already left for the United States for a road show on the sovereign bond issue announced last month.

S&P Global Ratings said in a statement on Tuesday it considers exchange rate stability to remain a major priority for Sri Lanka's policymakers and its central bank, limiting monetary flexibility.

The central bank is struggling to maintain a flexible exchange rate in the face of heavy foreign outflows from government securities. The rupee has depreciated 1.2 percent so far this year, having lost 3.9 percent of its value against the dollar last year.

Foreign investors bought a net 701 million rupees ($4.64 million) worth of government securities in the week ended March 1, recording the first weekly net inflow for the year. They have sold a net 63.76 billion rupees of such instruments so far this year.

$1 = 151.3500 Sri Lankan rupees Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sherry Jacob-Phillips

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