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Sri Lankan rupee forwards tad firmer on banks’ dollar sales

COLOMBO (Reuters) – Sri Lankan rupee forwards were slightly firmer on Monday due to banks’ dollar sales, which outpaced importer demand for the greenback, but dealers expect downward pressure to persist until the middle of this year due to lower interest rates.

Actively traded two-week forwards were at 133.80/90 per dollar, compared with Friday’s close of 133.90/95, while one-week forwards were steady at 133.60/70 per dollar amid moral suasion by the central bank.

"There is some bank dollar selling. But import demand is also there," said a currency dealer asking not to be named.

Dealers said the rupee currency will be under pressure in May and June when credit growth is expected to hit a peak in the lower interest rate environment.

The central bank in its monetary policy statement on Wednesday, while reducing key rates to record lows, said the balance-of-payments outlook remains favourable in 2015.

Finance Minister Ravi Karunanayake on Wednesday said there were sufficient funds to defend the currency and a lot of foreign inflows are expected.

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 immediately available for comment.