COLOMBO: Sri Lankan rupee forwards weakened slightly as importers' dollar demand and banks' short-covering weighed on the local currency although the central bank prevented a sharp fall before Friday's 2015 budget announcement, dealers said.
President Mahinda Rajapaksa, also the finance minister, is expected to present a populist election budget for 2015 that manages to contain borrowing mainly to an expected pickup in the pace of economic growth.
The budget speech will begin at 0800 GMT.
"There is importer dollar demand and some banks are buying dollars to cover their short positions. But largely the market is waiting for the budget," a currency dealer said.
The spot currency was quoted at 130.80/131.10 per dollar but not traded, dealers said. It was not traded during the week after closing at 130.60/80 on Oct. 17.
The three-day forwards, or spot-next, actively traded in the absence of spot, were at 131.05/131.15 per dollar at 0617 GMT, tad weaker than Thursday's close of 131.00/05.
Exporters were reluctant to sell dollars ahead of the budget announcement, dealers said. Dealers said the central bank's moral suasion was not seen on the spot, but it persuaded some banks not to trade the spot-next below 131.10. Central bank officials were not available for comment.
Nandalal Weerasinghe, a central bank deputy governor, said on Monday the monetary authority would intervene to prevent short-term volatility in the rupee and said moral suasion was to prevent sharp changes.
Weerasinghe said the central bank has been preventing a sharp appreciation in the currency by intervening to maintain some stability over the last 12 months.
Sri Lanka's stock market index was up 0.2 percent, or 13.93 points, at 7,203.44 as of 0625 GMT.
Turnover was 397.5 million rupees ($3.04 million), with 27.6 million shares changing hands.
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