COLOMBO, Nov 22 (Reuters) - The Sri Lankan rupee closed steady on Friday despite downward pressure due to importer dollar demand as banks were reluctant to trade above the 131.10 level, dealers said, a day after the government stressed the importance of maintaining a flexible exchange rate regime.
The spot rupee was quoted at 131.10/20 per dollar, flat from Thursday's close.
Three dealers said banks were reluctant to trade the currency above 131.10 per dollar, a level seen as desirable by the central bank, and forward trade was active.
Three-day forward or spot next ended at 131.22/25 per dollar, a tad firmer than Thursday's close of 131.20/30, as some banks sold dollars to minimise holding cost, dealers said.
Many banks held dollars expecting some change in the country's foreign exchange policies in the budget.
While presenting the 2014 budget, President Mahinda Rajapaksa, who is also the finance minister, said maintaining a flexible exchange rate regime along with productivity improvement is important to achieve the export revenue target of $20 billion in 2020.
Dealers and banks, however, said there would be hardly any change in the central bank's exchange rate policy as it is already under a flexible regime, despite it being managed.
The rupee hit a record low of 135.20 on Aug. 28, but has managed to stem further losses and has gained 3.10 percent since then. (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)