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Sri Lanka rupee at 196.50 to greenback in one week forwards amid excess liquidity

ECONOMYNEXT – Sri Lanka’s rupee saw sporadic trading in forward markets against the US dollar with one weeks trading around 196.60/198.00 levels Wednesday, dealers said.

There were some spot sales around 192.75/95 to the US dollar, in intra-day trade as well as isolated one month trades of 199 to the US dollar.

Sri Lanka’s rupee had come under heavy pressure amid excess liquidity injected to keep a call money in the middle of a policy corridor.

Despite excess liquidity of 135 billion rupees in money markets domestic operations offered another 10 billion rupees of excess liquidity through a reverse repo auction.

There were no takers among cash flushed commercial banks.

Sri Lanka has already slapped trade controls over currency pressure while foreign investors have sold down dollar bonds as the credibility of the peg was lost.

If liquidity is injected the currency has to be defended with dollar sales to mop up the liquidity. It is not defended the peg breaks.

However the Treasury has said all foreign loans would be settled as Sri Lanka was keen to maintain its zero default record. (Colombo/Apr23/2020)