Friday, 8 August 2014 00:56
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Reuters: The Sri Lankan rupee closed steady on Thursday as two state banks bought dollars to prevent an appreciation in the local currency while higher liquidity due to dollar purchases by banks put downward pressure on market interest rates, dealers said.
The rupee ended at 130.19/20 per dollar, little changed from Wednesday’s close of 130.19/21.
“Rupee traded flat with state banks buying dollars at 130.19, preventing appreciation. The appreciation trend is intact,” said a currency dealer.
Central bank chief Ajith Nivard Cabraal said on Thursday there was a greater chance of a cut, rather than a hike, in key policy rates, a day after one-year government debt yield fell to 6.45 percent, below the rate of 6.50 percent at which the central bank mops up liquidity from commercial banks.
The yield on one-year T-bills fell to as low as 6.32 percent at the secondary market, dealers said.
Two central bank officials told Reuters on Wednesday that the monetary authority bought $218 million from the market on Tuesday and over $1 billion this year through Tuesday.
The central bank’s dollar purchases from the market to support exporters have increased rupee liquidity and sent yields on government securities lower amid lacklustre demand for private credit and imports, dealers said.
A central bank official said last month the rupee would have risen to 125 per dollar had the central bank not intervened.
The IMF last week urged Sri Lanka to limit its intervention in the foreign exchange market, a week after Finance Secretary P.B. Jayasundera said Sri Lanka was building up its foreign exchange reserves while keeping the rupee stable with the country seeing more inflows.
