COLOMBO: The Sri Lankan rupee ended steady in thin trade on Wednesday, helped by moral suasion by the central bank, but the market expects rising interest rates to ease downward pressure on the local currency, dealers said.
Dealers expect exporters to convert dollars into rupees when the rise in interest rates becomes attractive, they said.
Actively traded one-week forwards ended steady at 133.60/75 per dollar. Central bank officials were not available for comment.
"Demand (for dollars) is still there, but there is not much of exporter (dollar) conversions and everybody is looking at the interest rates," a currency dealer said on condition of anonymity.
Yields on t-bills rose between 21 basis points and 38 basis points at a weekly auction on Wednesday, with the 91-day t-bill yield rising to a 14-month high of 7.10 percent.
The central bank has raised more than 105.3 billion rupees ($792.3 million) this week alone through the sale of development bonds and government securities.
It also plans to raise a further 20 billion rupees ($150.49 million) via t-bonds on Thursday.
The heavy borrowing by the government has resulted in a spike in market interest rates.
The spot currency was steady for the 11th straight session at 132.90/133.20, well within the limits set by the central bank.
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