COLOMBO: Sri Lankan rupee forwards ended firmer on Wednesday as dollar inflows from remittances outpaced importer demand for the greenback, dealers said.
Actively traded two-week rupee forwards ended at 133.70/77 per dollar compared to Tuesday's close of 133.75/85.
"Dollar selling pressure is there as the seasonal remittances are picking up slowly," said a currency dealer on condition of anonymity.
Sri Lanka sees a rise in inward remittances ahead of the Sinhala-Tamil new year on April 14 as expatriates send money for their relatives in the country.
Dealers expect the seasonal inward remittances to continue till the first week of April.
Dealers also they expect the central bank to defend the currency from a sharp appreciation.
The central bank prevented a fall in the spot rupee and one-week forwards at 132.90/133.20 and 133.60/75, respectively, within the limits set by it.
Central bank officials were not available for comment.
Local conditions have turned tighter due to a strong rupee and they imply a negative impact on output and prices down the road and the solution is not to ease policy rate or a nominal devaluation of the rupee, Prithviraj Srinivas, an economist at HSBC Global Research, said in a market report.
"We think the appropriate policy response is to use the opportunity provided by the terms of trade improvement to pursue structural reforms that make the tradable sectors more competitive and expand tradable goods and services in the economy," Srinivas said.
Dealers said the market may further wait for cues on the interest rate after t-bill yields fell two straight weeks.
Yields on t-bills fell between 17 and 19 basis points at a weekly auction on Wednesday, after they fell between 31 and 44 basis points last week. They spiked to 112-124 basis points in the two previous weekly auctions.
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