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Sri Lankan rupee forwards rise slightly on dollar inflows

COLOMBO (Reuters) – Sri Lankan rupee forwards traded a tad firmer on Friday due to dollar inflows, dealers said, but pressure on the local currency is seen persisting through the middle of this year on lower interest rates. Actively traded one-month forwards were at 134.20/50 per dollar at 0612 GMT, compared with Thursday’s close of 134.70/90. "Today we saw some banks sold dollars, there are some inflows," said a currency dealer asking not to be named. Two-week and one-week forwards were steady at 133.90/134.00 and 133.60/70 per dollar, respectively. The central bank through moral suasion prevented the spot rupee from dropping below 132.90/133.20, a limit it set in February. Central bank officials were not available for comment. Currency dealers also said the political uncertainty was weighing on investor confidence and putting pressure on the exchange rate after President Maithripala Sirisena’s 100-day programme ended on Thursday. Sirisena, who promised to dissolve the parliament after the end of his 100-day programme on April 23, addressed the nation later on Thursday and sought support of all legislators to pass the constitutional and electoral reforms. The government will present constitutional reforms, including establishing independent police, judiciary, and election and public service commissions in the parliament on Monday and debate on them for two days before voting. Currency dealers said the rupee would be under pressure through June as credit growth is expected to hit a peak due to lower interest rates. The central bank on April 15 in a surprise move cut key rates to record lows and said the outlook on balance of payments remains favourable in 2015. The main stock index was up 0.23 percent at 7,130.56 at 0601 GMT, its highest since March 16. Turnover stood at 222.04 million rupees ($1.67 million). Investors have been cautious due to political uncertainty as Prime Minister Ranil Wickremesinghe’s party did not have a majority in Parliament and waiting for directions after the parliamentary polls.