The Sri Lankan rupee closed largely unchanged on Monday as importer dollar demand almost offset the inward remittances after the country's central bank raised benchmark interest rates by 25 basis points. The central bank raised the spot rupee reference rate by 10 cents to 151.70 on Monday after the bank raised the it by 25 cents on March 20.
On Friday, the central bank raised interest rates for the first time in eight months, saying tighter policy was a precaution against a build-up of inflationary pressures.
Analysts said the rate hike, a move aimed at easing pressure on the rupee, could help stabilise the domestic currency that is hurt by rising imports and outflows due to rupee bond sales by foreign investors.
Rupee forwards were active, with two-week forwards ending at 152.65/75 per dollar, compared with Friday's close of 152.60/70.
"The demand (for dollars) was there and in fact the central bank also raised the reference rate today," said a currency dealer, asking not to be named.
Foreign investors net bought government securities worth 70 million rupees ($461,285) in the week ended March 22. They have net sold 63.2 billion rupees of such instruments so far this year.
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