ECONOMYNEXT – Sri Lanka’s rupee opened at 240/260 and is quoted t 260/275 to the US dollars Thursday after the central bank re-confirmed there were no restrictions on trading, dealers said.
Amid the uncertainty quotes are wide.
A float of the currency helps match inflows to outflows and the central bank no longer has to give reserves as long as no more money is printed to sterilize the intervention.
The currency tends to fall steeply when a float starts and then stabilizes.
“We observe the banks are cautious and that is a good sign and their guidance to clients would also be helpful at this juncture,” Central Bank Governor Nivard Cabraal said.
“Our bankers are mature and responsible breed and we have confidence and that they too act in a responsible manner that would be fair to all stakeholders, importers exporters borrowers, lenders and expatriate workers.”
Sri Lanka allowed a float of the currency after reserves fell to low levels.
W A Wijewardene former Deputy Governor of the Central Bank said a rate hike will help support the rupee by reducing aggregate demand and imports and arbitrage opportunities.