The Sri Lankan rupee ended steady on Friday despite importer dollar demand ahead of the parliamentary election on Monday, while dealers said they expected the currency to face further pressure in line with weakening regional currencies. The rupee traded steady at 133.90 per dollar as one of the two state banks, through which the central bank usually directs the market, sold dollars at a flat rate of 133.90.
Dealers said the there was heavy importer dollar demand with some booking forwards, and the dollars were traded at an implied spot rate of 135.00 rupees. Exporters were expecting the currency to depreciate further, they added. "I do not see any logic in the central bank defending the rupee while other regional currencies are allowed to fall. After the election, the central bank might allow a fall in the currency," a currency dealer said, asking not to be named.
Central bank officials were not immediately available for comment. The rupee fell for a second straight session on Thursday as the state-run bank raised the currency's peg against the dollar by 10 cents to allow the exchange rate to depreciate to 133.90. Dealers say the currency may fall to 135 levels in the short term if the central bank permits the rupee to depreciate, in line with the weakening seen in other global currencies against the dollar. The currency has fallen 0.3 percent since August 5 as the state-owned bank raised the currency's peg against the dollar by 40 cents on three occasions, allowing the exchange rate to fall.
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