(Colombo) REUTERS: The Sri Lankan rupee closed steady yesterday after six straight sessions of decline, as importer dollar demand offset mild exporter dollar sales, traders said.

The rupee closed flat at 159.25/35 per dollar. It has declined 3.8 percent so far this year. “We think the rupee will hold at this level for the moment. We haven’t seen much volatility in the last three sessions,” a currency dealer said. The Central Bank left its key rates unchanged as expected on Friday, saying a low rates environment and stabilising inflation would support its economy in the face of a fragile currency.

The Central Bank Governor Indrajit Coomaraswamy said the depreciation was mainly driven by external factors and that emerging-market currencies were under pressure.

The International Monetary Fund (IMF) said last month that Sri Lanka’s economy remained vulnerable to adverse shocks due to a sizeable public debt and large refinancing needs. Currency dealers said the rupee was weakening gradually after a brief recovery.

 Dealers said the downward pressure on emerging market currencies was due to the hike in U.S. rates, trade tensions between China and the United States, and rising oil prices. The spot rupee hit an all-time low of 160.17 per dollar on June 20. A strengthening dollar since mid-April has increased the credit risk of several emerging markets, including Sri Lanka, due to currency depreciation, ratings agency Moody’s said late last month. 

Foreign investors sold government securities worth a net Rs.674 million (US$4.24 million) in the week ended July 4, bringing the outflows so far this year to Rs.29.6 billion (US$185.9 million), Central Bank data showed