Reuters - The Sri Lankan rupee traded slightly firmer on Monday as dollar sales by exporters and banks outpaced demand for the greenback from importers, dealers said.

The spot rupee was trading at 153.50/55 per dollar, as of 0611, from Friday's close of 153.65/70.

"There are some (dollar) conversions. Some exporters and banks are also selling," a currency dealer said, asking not to be named.

But dealers said they expect a gradual depreciation in the currency with the central bank buying dollars continuously.

Central Bank Governor Indrajith Coomaraswamy said last week the rupee was still "over-valued" and that the central bank was still buying dollars to avoid any appreciation.

The central bank is compelled to buy dollars from the market to meet a reserves target set by the International Monetary Fund (IMF) under a $1.5 billion, three-year loan programme.

Coomaraswamy told Reuters that the central bank had bought dollars in the range of $750 million to $800 million from the market, of the $1.2 billion it had planned to purchase in the 10 months from March this year.

Analysts expect the currency to depreciate 4 percent this year. It has already fallen 2.6 percent so far in 2017.

Dealers said the market is also concerned that the downward pressure on the rupee is likely to rise due to the fall in government bond yields, after the IMF called for more monetary policy tightening and measures to curb strong credit growth.

T-bill yields fell 4-22 basis points at a weekly auction on Wednesday.

The fall in T-bill yields, which move in tandem with market interest rates, will increase the demand for cheap credit and add downward pressure on the currency, dealers said.

The IMF, which completed its second review of a $1.5 billion loan on Tuesday, said the country's performance under its programme has been "broadly satisfactory".