March 23, 2017 / 11:59 AM / in 8 months

Sri Lankan rupee ends weaker ahead of cbank rate review

COLOMBO, March 23 (Reuters) - The Sri Lankan rupee ended slightly weaker in thin trade on Thursday as dollar demand from importers surpassed selling of the U.S. currency by exporters, with investors waiting for the central bank’s decision on interest rates.

Sri Lanka’s central bank could raise its key policy rates in the coming months if it skips a chance to tighten at its second monetary policy review of the year, a Reuters poll showed, two weeks after the International Monetary Fund called for further tightening.

The policy announcement is due on Friday at 0200 GMT.

Rupee forwards were active, with two-week forwards ending at 152.45/55 per dollar, compared with Wednesday’s close of 152.40/60.

“The market is waiting for direction from the policy announcement,” said a currency dealer, asking not to be named.

“A state bank was buying dollars throughout the day to cover their bills - may be an oil bill; that weighed on the market.”

Dealers said the central bank could raise rates to prop up the rupee as rising imports and outflows due to rupee bond sales by foreign investors put pressure the currency.

The central bank raised the spot rupee reference rate by 25 cents to 151.60 on Monday. Dealers said the banking regulator had 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 ($9.3 million) in the week ended March 15, after two weeks of net inflows. They have net sold 63.3 billion rupees of such instruments so far this year. ($1 = 151.5000 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

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