COLOMBO Jan 5 The Sri Lankan rupee traded
weaker on Thursday due to dollar buying by foreign banks, but
the central bank's moral suasion prevented further decline, two
days after the monetary authority's chief signalled a change in
its intervention policy to defend the currency.
Central Bank Governor Indrajith Coomaraswamy said on Tuesday
that defending the rupee with foreign exchange reserves
"doesn't seem sensible" as it has always been followed by a
sharp depreciation in the currency.
Rupee forwards were active, with one-month forwards
trading at 151.00/30 per dollar at 0535 GMT, compared with
Wednesday's close of 150.90/10.
"The one week forwards traded at 150.40 and 150.50, but
moral suasion forced reversal of deals below 150.40," said a
currency dealer who declined to be named.
"There is (dollar) demand from some foreign banks probably
for bond outflows."
One-week forwards were quoted around 150.35/56 per dollar,
compared with Wednesday's close of 150.20/30, while spot-next
forwards and the spot rupee were hardly traded, dealers
The central bank said in a policy document on Tuesday that
experience had clearly demonstrated that maintaining "an
overvalued exchange rate at the expense of external reserves"
A smooth market-based exchange rate would prevent highly
disruptive adjustments after periods of stable rates
artificially maintained by continuous central bank intervention.
The central bank said it was time to stop this pattern and
commence building up of external reserves through sustainable
foreign exchange inflows.
The rupee has been under pressure due to rising imports and
net selling of government securities by foreign investors,
On Friday, the central bank raised the spot currency
reference rate to 150.00, a record low against the dollar.
Sri Lankan shares were steady at 6,153.39 as of 0524
GMT. Turnover stood at 480 million rupees ($3.21 million).
($1 = 149.4000 Sri Lankan rupees)
(Reporting by Ranga Sirilal and Shihar Aneez; Editing by