COLOMBO: Sri Lanka foreign currency reserves fell 6 percent in the last two months of 2014, latest central bank data showed on Monday, with the decline resulting from suspected intervention to support a weakening rupee , according to traders.
Foreign currency reserves declined by $474.33 million to $7.37 billion in the two months through December, the central bank data showed.
"This is because the central bank was defending the currency heavily from depreciation," a currency dealer said on condition of anonymity.
Others shared the same view.
The central bank's data showed it had sold a net $241 million to the market in November and December.
The central bank, however, had been a net buyer of $544.25 million in 2014 due to foreign inflows from loans and into stocks in the first eight months of the year.
A central bank official said net dollar sales were not only to defend the rupee, but also to meet payments.
The central bank has intervened heavily through state-run banks to reduce market volatility and keep the currency steady, central bank officials have told Reuters.
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