February 9, 2017 / 7:23 AM / 10 months ago

Sri Lanka rupee steady ahead of long weekend

COLOMBO, Feb 9 (Reuters) - The Sri Lankan rupee traded steady on Thursday ahead of a long weekend as dollar sales by exporters offset the demand for the U.S. currency from banks to facilitate continuing exit of foreign investors from government securities, dealers said.

Sri Lanka’s stock and foreign exchange markets will be closed on Friday for a Buddhist religious holiday.

Rupee forwards were active and two-week forwards traded steady at 151.20/25 per dollar as of 0631 GMT.

“The rupee is trading steady after yesterday’s exporter conversions,” said a currency dealer asking not to be named. “I don’t expect much to happen until Monday because of the long weekend.”

Sri Lanka’s central bank governor, Indrajit Coomaraswamy, said on Wednesday the central bank was not planning to abruptly scrap its support for the rupee.

“It will be a gradual one. You have seen what has happened last month or two. That’s the pattern,” Coomaraswamy said.

The central bank has allowed the rupee to gradually depreciate since mid-December, revising its spot reference rate multiple times.

The rupee has weakened 0.6 percent so far this year and has been under pressure due to rising imports and net selling of government securities by foreign investors, while the central bank said defending the currency with foreign exchange reserves did not “seem sensible”.

The central bank kept its key rates steady on Tuesday for a sixth straight month, but flagged possible “corrective measures” in the months ahead in a sign further tightening might be on the cards to temper inflation pressures and safeguard a fragile rupee.

Foreign investors net sold 26.6 billion rupees ($177.10 million) worth of government securities in the four weeks to Feb. 1, according to the latest central bank data.

Sri Lankan shares were largely flat at 6,097.47, as of 0704 GMT. Turnover stood at 364.1 million rupees ($2.42 million).

$1 = 150.7000 Sri Lankan rupees Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri

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