RTRS:Sri Lanka rupee slightly down on importer dlr demand; stocks ease
Feb 18 (Reuters) - The Sri Lankan rupee traded a tad weaker on Tuesday due to dollar demand from importers, a day after the central bank kept its key policy rate steady at multi-year lows.
The spot rupee was traded at 130.85/90 per dollar at 0705 GMT, from Monday's close of 130.83/87.
"State bids were seen, possibly due to oil import bills," said a currency dealer, asking not to be named.
Sri Lanka's central bank on Monday kept policy rates steady at multi-year lows, with inflation expected to be contained throughout 2014 by "well-managed demand conditions and improved domestic supply."
The central bank said private sector credit growth has bottomed out with a gain of 7.5 percent year-on-year in December from 7.3 percent a month earlier. However, credit growth is far below the record level of above 35 percent hit in 2011.
Sri Lanka's stock and bond markets have seen a net $119 million worth of inflows this year through Feb. 10 while the central bank has absorbed $58.7 million in the same period to prevent volatility in the rupee.
The market is still concerned about the sustainability of the central bank's policy measures to maintain a stable exchange rate, which is defended via selling and buying dollars, in a low-interest-rate regime.
Sirimevan Colombage, a former central banker and a senior professor at the Open University of Sri Lanka wrote in a weekend paper that either a significant depreciation of the currency or an upward movement of interest rates or both is inevitable in the absence of tangible growth in exports.
Central Bank Governor Ajith Nivard Cabraal on Monday, however, said "current conditions are sustainable," for lower interest rate and stable exchange rate, but did not elaborate.
Currency dealers and traders said the central bank's policies should work until the market sees a jump in private sector credit growth.
Dealers expect the central bank to keep the currency below 130.85 per dollar until April. Usually, the rupee is under pressure in March and early April due to seasonal imports ahead of the traditional new year in mid-April.
The rupee has gained about 3.3 percent since it hit a record low of 135.20 on Aug. 28 last year. It lost 2.5 percent in 2013.
At 0706 GMT Sri Lanka's main stock index was down 0.23 percent, or 14.13 points, at 6,041.98. (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)
