Sri Lankan rupee recovers marginally

As state bank sold dollars to boost Sri Lanka’s rupee on Tuesday after it hit a record low of 131.60 a day earlier, despite strong importer demand for greenbacks due to the forthcoming April festive season. The rupee, however, retreated to close at 129.90/130.00 a dollar, up from on Monday’s close of 130.00/131.00. “Two state banks sold dollars at 129.00 and the rupee recovered slightly,” a currency dealer said on condition of anonymity. Two others confirmed the move. State-run Bank of Ceylon, through which the central bank usually directs the market, said the dollar sale was for its own purposes and was not an intervention by the central bank. The other state-run bank, People’s Bank declined to comment. Many dealers said the reason for the sharp rupee depreciation was due to the central bank buying dollars to boost reserves.  The central bank spent more than $2.7 billion in the second half of 2011 to defend the rupee against depreciation. “The central bank has to meet reserves target to borrow the next tranche of the International Monetary Fund loan. So it is buying all the dollars in the market,” a currency dealer said.