March 22, 2017 / 12:47 PM / in 4 months

Sri Lankan rupee falls ahead of central bank rate review

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COLOMBO, March 22 (Reuters) - The Sri Lankan rupee fell in thin trade on Wednesday as dollar demand from importers offset selling of the U.S. currency by exporters ahead of a decision on interest rates by the central bank.

The bank meets to discuss monetary policy later this week and could raise key policy rates then or in the coming months, a Reuters poll showed, two weeks after the International Monetary Fund called for further tightening.

Rupee forwards were active, with two-week forwards ending at 152.40/60 per dollar, from Tuesday's close of 152.40/45.

"Some exporter sales helped prevent a steeper fall," said a currency dealer, asking not to be named. "We hope the central bank will raise the interest rates to help ease the pressure on the currency."

Rising imports and outflow from rupee bond sales by foreign investors, however, are expected to exert pressure on the currency, dealers said.

The central bank raised the spot rupee reference rate by 25 cents to 151.60 on Monday. It has been preventing spot rupee trades below 151.35 per dollar since March 8.

Central bank officials were not available for comment.

Foreign investors net sold government securities worth 1.41 billion rupees ($9.28 million) in the week ended March 15. This came after two weeks of net inflows.

They have net sold 63.3 billion rupees of such instruments so far this year.

The rupee has fallen 1.31 percent so far this year, and dealers say they expect the currency to weaken 6-8 percent in 2017. It lost 3.9 percent against the dollar last year.

$1 = 151.5000 Sri Lankan rupees Reporting by Shihar Aneez and Ranga Sirilal; Editing by Biju Dwarakanath

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