The Sri Lankan rupee ended weaker on Thursday due to dollar buying by foreign banks, but the central bank's moral suasion prevented further fall, two days after the monetary authority signalled a change in its intervention policy. Central Bank Governor Indrajith Coomaraswamy said on Tuesday that defending the rupee with foreign exchange reserves "doesn't seem sensible" as it has always been followed by a sharp depreciation in the currency.

Rupee forwards were active, with one-month forwards closing at 151.00/20 per dollar, compared with Wednesday's close of 150.90/10. "The one-week forwards traded at 150.40 and 150.50, but moral suasion forced reversal of deals below 150.40," said a currency dealer who declined to be named.

"There was (dollar) demand from some foreign banks probably for bond outflows." Officials from the central bank were not available for comments. One-week forwards ended at 150.35/45 per dollar, compared with Wednesday's close of 150.20/30, while spot-next forwards and the spot rupee were hardly traded, dealers said. The rupee has been under pressure due to rising imports and net selling of government securities by foreign investors, dealers said.

Copyright Reuters, 2017