Sri Lankan rupee forwards closed slightly weaker on Wednesday as mild importer dollar demand outpaced inflows from remittances and selling of the greenback by exporters, dealers said. Actively traded one-week forwards ended at 133.24/26 per dollar, compared with Tuesday's close of 133.20/25. Two-week forwards ended at 133.35/40 per dollar, compared with their previous close of 133.30/40.
Two-week forwards have gained 0.53 percent while the one-week forwards have risen 0.27 percent since March 19 through Tuesday.
"There were some importer (dollar) demand today, it's like the remittances are drying down," said a currency dealer on condition of anonymity.
People are converting dollars into rupees ahead of public holidays on April 13 and 14, dealers said, adding the local currency was expected to gain on higher seasonal inward remittances ahead of the Sinhala-Tamil New Year on April 14.
The central bank through moral suasion prevented the spot rupee from dropping below 132.90/133.20, a limit it set in February. Central bank officials were not available for comment.
Sri Lanka's government borrowing has risen sharply since January, central bank data showed on Monday, as the new government has sharply increased state sector wages and lowered duties on key commodities.
The increased borrowing has put pressure on government finances and pushed up yields on Treasury bills by between 76 and 82 basis points (bps) since January 7.
Sri Lanka's parliament however rejected a plan Tuesday to increase government borrowing limits by 400 billion rupees after public spending surged in the run-up to parliamentary elections scheduled for after April 23.
Bond yields across maturities went up by about 10 to 15 basis points on Wednesday following the move, dealers said. Two-year bond yields rose to 8.25 percent from 8.10 percent on Tuesday, dealers said.
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