Sri Lanka rupee bounces on exporter, bank dollar sales; still under pressure

COLOMBO | Fri Aug 30, 2013

Aug 30 (Reuters) - The Sri Lankan rupee pulled further away from record lows on Friday as exporters and banks sold dollar, but dealers said the currency is likely to remain under downward pressure in the absence of strong dollar inflows.

The rupee spot next or one-day forward, which was active in the market in the absence of spot trade, was traded at 133.00/10 per dollar at 0609 GMT, up from Thursday's close of 133.40/133.60.

It hit a record low of 135.20 per dollar on Wednesday, amid panic buying by importers, before the central bank governor said the currency movement was an aberration.

Spot rupee was quoted at 132.90/133.10 in early trade, Thomson Reuters data showed.

"Some banks and exporters are seen selling dollars after the rupee did not depreciate as they expected," a currency dealer said on condition of anonymity.

"But the rupee is still under pressure and it should depreciate further unless we see some strong dollar inflows."

Some dealers said the currency will get some respite if planned bond inflows from the state-owned National Savings Bank (NSB) come to the market in near future.

The NSB, which is on a roadshow in London on Friday after the meetings with U.S.-based investors early in the week, has planned to raise a minimum $500 million through the sale of a likely five-year bond with a target yield around 7 percent.

Before the market opened, the central bank said it had imposed a 100 percent margin deposit requirement against letter of credits for motor vehicle imports, a move analysts said was aimed at easing downward pressure on the rupee.

The rupee has been falling since early July as foreign investors have pulled out of Sri Lanka's treasury bonds on expectations the Federal Reserve will soon begin to taper its massive bond buying programme.

The rupee has fallen nearly 5 percent since June 7 and nearly 4 percent so far this year, after depreciating by around 10 percent in 2012.

Sri Lanka's main stock index traded 0.19 percent or 10.97 points weaker at 5,814.09 at 0627 GMT. (Reporting by Shihar Aneez; Editing by Kim Coghill)