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COLOMBO, July 12 (Reuters) - The Sri Lankan rupee ended slightly firmer on Wednesday due to greenback sales by banks and exporters, while the central bank's dollar buying prevented an appreciation in the local currency, dealers said.
The spot rupee ended at 153.65/75 per dollar, compared with Tuesday's close of 153.70/75.
"There was exporter dollar sales and we saw some inflows. If not for the central bank dollar buying, the rupee would have appreciated further," said a currency dealer, asking not to be named.
The central bank's Deputy Governor Nandalal Weerasinghe said the bank had completely stopped defending the currency unlike in the past.
"Since February, we have been only buying dollars. We are not selling at all. We do not see any pressure on the rupee. It is market-driven demand and supply," he told Reuters in an interview.
"If we do not intervene and buy, probably it will appreciate. We are buying and preventing certain appreciation."
Dealers said the market has priced in further depreciation due to the central bank's no-intervention policy.
The spot rupee resumed trading on June 19 for the first time since May 5, when the central bank fixed its reference rate at 152.50.
Dealers said they expected seasonal demand for dollars to pick up from August.
The rupee has been under pressure since early this year after the central bank stopped providing support for the currency at a time when the island nation faces a balance of payments crunch.
The rupee has fallen around 2.6 percent so far this year.
The central bank is also compelled to buy dollars from the market to meet the reserve target set by the International Monetary Fund under a $1.5 billion, three-year loan programme.
$1 = 153.5000 Sri Lankan rupees Reporting by Shihar Aneez and Ranga Sirilal; Editing by Sherry Jacob-Phillips