The Sri Lankan rupee ended steady on Tuesday amid thin trade as many investors stayed away in a holiday-shortened week, currency dealers said. The markets will be closed on Thursday for a Buddhist religious holiday and Friday for Christmas. The rupee closed at 143.65/85 per dollar, nearly unchanged from Monday's close of 143.65/90. It hit a record low of 143.80 last week.
"There were only a few trades," a currency dealer said asking not to be named. The currency edged up earlier in the day due to a few exporter conversions, dealers said. The rupee has fallen 6.2 percent since the central bank allowed free float of the currency on September 4. It has fallen 8.7 percent so far in the year. The rupee will remain weak next year unless Sri Lanka tightens monetary and fiscal policy, dealers say, as the country has low interest rates, little foreign currency reserves and is highly dependent on imports. Finance Minister Ravi Karunanayake told parliament last week that Sri Lanka's foreign exchange reserves were at "a healthy" $6.1 billion. That figure is however 26 percent lower than the country's reserves at the end of 2014.
Sri Lanka is planning to extend a $1.5 billion currency swap with the Reserve Bank of India by one year, in a bid to boost its reserves. Commercial banks parked 47.7 billion rupees ($332.06 million) of surplus liquidity on Tuesday using the central bank's deposit facility at 6 percent, while they borrowed 102 million rupees using the central bank's lending facility at 7.5 percent, official data showed.