COLOMBO, Feb 14 (Reuters) - The Sri Lankan rupee firmed on Tuesday as dollar sales by exporters offset demand for the U.S. currency although depreciation concerns continued to weigh, dealers said.
Rupee forwards were active, with two-week forwards closing at 151.15/25 per dollar, firmer from Monday’s close of 151.20/25.
“Some local banks are on the (dollar) selling side,” said a currency dealer, requesting not to be named.
“We haven’t seen foreigners selling and it may be also a reason for the easing pressure. But today, there was a dividend payment by a foreign bank.”
Dealers said the market has factored in a gradual depreciation risk for the rupee and it expects a 4-5 percent fall in the currency this year, unlike the sharp depreciation seen in the the past.
The rupee fell 3.9 percent last year, following a 10 percent drop in 2015.
The central bank has allowed the currency to gradually depreciate since mid-December, revising its spot reference rate multiple times.
Sri Lanka’s central bank governor, Indrajit Coomaraswamy, said last week the bank was not planning to abruptly stop supporting the rupee.
The rupee has weakened 0.7 percent so far this year, under pressure due to rising imports and net selling of government securities by foreign investors.
The central bank has said that defending the currency with foreign exchange reserves does not “seem sensible”.
The central bank kept its key rates steady last week for a sixth straight month, but flagged possible “corrective measures” in the months ahead in a sign that further tightening might be on the cards to temper inflation pressures and safeguard a fragile rupee.
Foreign investors net sold 31.38 billion rupees ($208.30 million) worth of government securities in the four weeks to Feb. 8, according to the latest central bank data. ($1 = 150.6000 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)