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Sri Lanka rupee ends weaker on dollar demand from importers

Source : REUTERS
Last Updated: Wed, Sep 18, 2013 12:10 hrs

COLOMBO, Sept 18 (Reuters) - The Sri Lankan rupee ended down on Wednesday due to mild importer dollar demand, while the central bank defended the currency via moral suasion, dealers said, ahead of a U.S. Federal Reserve decision on its ultra-loose monetary policy.

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

The spot-next ended at 132.35/45 per dollar, weaker from Tuesday's close of 132.30/40.

The Fed will decide later on Wednesday when and by how much it would scale back its asset purchases from $85 billion a month.

Dealers said any reduction may prompt foreign investors to exit Sri Lankan government securities, which could put the rupee under pressure.

However, central bank Governor Ajith Nivard Cabraal said on Tuesday that Sri Lanka would not be hurt by the Fed's tapering.

The currency hit a record low of 135.20 on Aug. 28, but has recovered since then. It has fallen 3.6 percent this year.

The rupee has been falling since early July when foreign investors started pulling out of local bonds as U.S. Treasury yields rose in expectation of a Fed pullback.

The stock and foreign exchange markets will be closed on Thursday for a Buddhist holiday. (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Prateek Chatterjee)




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