Sri Lanka rupee ends tad weaker on importer dollar demand

Last Updated: Tue, Sep 17, 2013 11:20 hrs

COLOMBO, Sept 17 (Reuters) - The Sri Lankan rupee ended a tad weaker on Tuesday on mild dollar demand from importers, but dealers expect it to be steady in the short term due to the $750-million inflow from a bond sale by state-run National Savings Bank (NSB).

Still, optimism around the local currency eroded slightly ahead of a U.S. Federal Reserve meeting and as banks were compelled to trade rupee forwards after a central bank directive, dealers said.

The Fed meets later on Tuesday and Wednesday to decide when and by how much to scale back its asset purchases. Dealers said any reduction may prompt foreign investors to exit Sri Lankan government securities, which could put the rupee under pressure.

Dealers said the three-day forward, or spot-next, was active on Tuesday after the central bank directed some banks not to trade spot above 132.25 rupees.

The spot-next closed at 132.30/40 per dollar, weaker from Monday's close of 132.30/35.

The rupee spot was inactive on Tuesday after it was actively traded in four straight sessions through Monday. It was quoted at 132.20/30 by 1050 GMT, compared to Monday's close of 132.25/35.

"Spot-next is active again today as the central bank asked some banks not to trade rupee spot above 132.25 per dollar," a currency dealer said.

Many dealers expect the rupee to be steady around the 132.25 level due to the NSB's 5-year bond inflow, which was priced to yield 8.875 percent.

The currency hit a record low of 135.20 on Aug. 28, but has since recovered. It has fallen 3.6 percent this year, after depreciating about 10 percent in 2012. (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)

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