REUTERS: Sri Lankan rupee forwards edged down yesterday on importer dollar demand, and dealers expect the currency to depreciate further due to higher imports and lack of inflows.

Rupee forwards have been active since January 27 as there has been little trading in spot currency, with banks reluctant to trade below the 144.00 level amid moral suasion by the Central Bank.

One-week rupee forwards, which act as a proxy for spot, traded at 144.35/40 per dollar at 0554 GMT compared with Tuesday’s close of 144.32/35.

“The importer demand is there, there is not much inflow and the demand is high,” said a currency dealer asking not to be named.

Another dealer said small banks have been buying dollars lower than the market rates amid higher demand for the greenback.

“It is a dicey situation. We don’t see much inflows though there are lot of outflows scheduled in the short term,” he said.

Sri Lanka needs to pay more than US $ 5 billion in foreign loans including interest payments, according to the Central Bank data.

Dealers said the Central Bank would not be able to hold the rupee at the current level without strong dollar inflows.

The Central Bank usually intervenes in times of high volatility though it floated the rupee on September 4.

Sri Lanka’s main stock index was 0.03 percent firmer at 6,374.41 at 0600 GMT. Turnover stood at Rs.82.8 million.