March 14, 2017 / 11:43 AM / 5 months ago

Sri Lankan rupee ends steady on moral suasion

COLOMBO, March 14 (Reuters) - The Sri Lankan rupee ended steady on Tuesday as the central bank's moral suasion prevented depreciation ahead of a bond auction to raise $830 million, dealers said.

The central bank reversed a transaction on the two-week rupee forwards that exceeded 152.60 per dollar, amid dollar demand from importers and for dividend payments, dealers said.

The market is expecting firm dollar inflows from Sri Lanka Development Bond auction due later in the day.

"They (the central bank) asked not to bid the two-week forwards above 152.60. They have reversed a transaction done at 152.75 today," a currency dealer said, asking not to be named.

Central bank officials were not available for comment.

Rupee forwards were active, with two-week forwards ending at 152.50/75 per dollar, little changed from Monday's close of 152.50/70.

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 1.1 percent so far this year, having lost 3.9 percent of its value against the dollar last year.

The country missed the end-December net internal reserves target set by the International Monetary Fund for a $1.5 billion loan approved last year and since then the central bank has been hardly selling dollars to defend the currency, dealers said.

The IMF last week urged the central bank to rebuild foreign reserves while maintaining exchange rate flexibility.

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

Foreign investors bought a net 1.87 billion rupees ($12.4 million) worth of government securities in the week ended March 8, recording the second weekly net inflow for the year. They have sold a net 61.89 billion rupees of such instruments so far this year. (Reporting by Shihar Aneez and Ranga Sirilal; Editing by Amrutha Gayathri)

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