COLOMBO, Jan 4 (Reuters) - The Sri Lankan rupee was steady in thin trade on Wednesday amid worries over slowing foreign fund inflows, even as the central bank chief said defending the currency using foreign exchange reserves was not sensible.
Central Bank Governor Indrajith Coomaraswamy said after the markets closed 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 150.90/10 per dollar at 0810 GMT, compared with Tuesday’s close of 151.00/20.
One-week forwards were quoted around 150.20/30 compared with Tuesday’s close of 150.25/35, while spot-next forwards and the spot rupee were hardly traded, dealers said.
“We have seen some demand in the morning but it has eased now,” said a currency dealer who declined to be identified.
“The central bank governor’s statement makes sense. It is more sensible to allow market players to determine it.”
The rupee has been under pressure due to rising imports and net selling of government securities by foreign investors, dealers said.
On Friday, the central bank raised the spot currency reference rate to 150.00, a record low against the dollar.
The banking regulator raised the spot reference rate by 50 cents last week, after a 40-cent increase in each of the previous two weeks amid sustained pressure on the currency.
Sri Lankan shares were down 0.01 percent at 6,158.50 as of 0819 GMT. Turnover stood at 900.9 million rupees ($6.03 million). ($1 = 149.4500 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)