"The US dollar continued to grind higher from its opening level of Rs. 131.10-20 to close at Rs. 131.20-30 on light importer demand. The market high was at Rs. 131.30 and the lowest was at Rs. 131.10," the Sri Lanka Forex Association said.
There was some indication that proceeds from the recent sovereign bond was used to repay short term domestic debt with the Central Bank announcing a repo auction to absorb excess rupee liquidity to the tune of Rs. 58 billion.
However, the bank was able to absorb Rs. 23.7 billion at 9.40 percent after bids amounted to only Rs. 23.85 billion, currency dealers said.
A further Rs. 35.17 billion was absorbed via the overnight repurchase window at 7.75 percent.
"This liquidity was caused because the government exchanged the dollar proceeds for rupees from the Central Bank outside the foreign exchange market," a currency dealer said.
The Central Bank would use the dollar proceeds to boost the country’s reserves. The US$ 1 billion sovereign bond issue will be used to repay a maturing US$ 500 million sovereign bond issue.