COLOMBO: Sri Lankan rupee edged down on Monday due to mild importer dollar demand, though selling of the greenback by banks prevented any further fall amid concerns over a statement by the International Monetary Fund, dealers said.
Rupee forwards have been active since Jan. 27 as there has been little trading in spot currency with banks reluctant to trade below the 144.00 level amid moral suasion by the central bank.
One-week rupee forwards, which act as a proxy for spot, was at 144.25/30 per dollar at 0743 GMT compared with Friday's close of 144.20/30.
The IMF on Friday urged Sri Lanka to take steps to reduce its fiscal deficit and raise tax revenues to help improve its balance of payments.
"This means you need to raise interest rates and local taxes in the near future," a currency dealer said asking not to be named. "But if you implement them, there could be political implications."
However, most of the dealers said raise in interest rates and taxes will help reduce the pressure on the exchange rate and an IMF backing through a loan will help to instil foreign investor confidence in the long term.
Dealers also said the central bank will not be able to hold the rupee at the same level without strong dollar inflows.
The central bank usually intervenes in high volatility though it floated the rupee on Sept. 4.
The rupee is under pressure despite a 150-basis-point increase in commercial banks' statutory reserve ratio from Jan. 16. The central bank kept its key policy interest rates unchanged on Jan. 25.
Sri Lanka's main stock index was 0.16 percent weaker at 6,394.71 at 0715 GMT. Turnover stood at 341.4 million rupees ($2.4 million).
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