Foreign investors sell US$38mn in rupee bonds in week

ECONOMYNEXT – Foreign investors have sold 5.4 billion rupees of Sri Lanka Treasuries (38 million US dollars) in the week to September 16, bringing the total foreign holdings of bonds down to 342.8 billion rupees, data shows.

Foreign investors started selling rupee bonds in the last quarter of 2014 but interest returned in 2015.

But they began to sell again after a rate cut in April 2015, which was made despite rising private credit and a sharp deterioration of the budget in January 28.

Since the rate cut foreign investors have sold out 122 billion rupees of bonds or around 630 million US dollars.

On September 04, Sri Lanka reduced interventions in forex markets, in a bid to float the rupee, but rising domestic assets of the monetary authority show that interventions are continuing.

Sri Lanka has a so-called soft or ‘non-credible’ peg to the US dollar, where both the interest rate and exchange rate is targeted. Whenever credibility of the peg is lost by money printing, investors flee and exporters hold back conversions, fearing depreciation. (Colombo/Sept18/2015)

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