By Wealth Trust Securities

The surplus liquidity in money markets was seen increasing to a near one-year high of Rs. 108.2 billion yesterday following a Treasury bond and coupon maturity of Rs. 119.6 billion on 1 January 2017. 

This in turn led to the OMO department of the Central Bank conduction term repo auctions to the tune of Rs. 70 billion in order to mop up liquidity. However, only an amount of Rs. 1 billion was drained out at a weighted average of 7.44% for a period of eight days while a further Rs. 50 billion was drained out on an overnight basis at a rate of 7.43%. Call money and repo averaged 8.42% and 8.66% respectively.

The start of the new year saw yields in the secondary bond market decreasing marginally with the liquid maturities of 01.03.21 and 01.08.24 hitting intraday lows of 12.00% and 12.24% respectively against its opening highs of 12.05% and 12.35%. In addition, a limited amount of activity was witnessed on the 01.04.18 and 01.09.23 maturities at levels of 10.83 and 12.20% respectively as well. 

Rupee depreciates further 

 The USD/LKR rate on the one month forward contract was seen depreciating marginally yesterday to close the day at Rs. 150.85/00 against its previous weeks closing of Rs. 150.75/85 on the back of continued importer demand. The spot next and one week forward contracts were quoted at Rs. 150.02/08 and Rs. 150.15/25 respectively.

The total USD/LKR traded volume for 30 November 2016 was $ 57.11 million.

Some of forward USD/LKR rates that prevailed in the market were three months - 152.60/80 and six months - 155.00/30.

Rupee ends thin session weaker, seen under pressure

Reuters: The rupee closed weaker in its first session of the year on Monday as a lack of inflows weighed on sentiment, dealers said.

The currency fell 3.9% in 2016.

Rupee forwards were active, with one-month forwards ending slightly weaker at 150.95/151.00 per dollar compared with Friday’s close of 150.75/85.

One-week forwards traded at 150.10/25 per dollar while spot-next forwards and the spot rupee were hardly traded, dealers said.

“The rupee is under pressure and it will continue to slide if we don’t see steady inflows,” said one currency dealer.

On Friday, the Central Bank raised the spot currency reference rate to 150.00, a record low against the dollar.

The banking regulator raised the spot reference rate by a total of 50 cents last week. That followed a 40-cent increase in each of the previous two weeks amid sustained pressure on the currency.

Officials from the Central Bank were not immediately available for comment.

The bank kept its benchmark interest rates steady on Friday for a fifth straight month as expected, saying credit growth was responding to earlier tightening measures.

Dealers said the market was bracing for some depreciation in the rupee in January after the Central Bank said this would not necessarily be negative for the economy.