Sri Lanka rupee closes firmer

ECONOMYNEXT – Sri Lanka’s rupee closed higher 140.50/60 against the US dollar in the spot forex market ending a steady losing streak amid exporter sales, though data showed continued reserve outflows.

The rupee opened wide at 140.70/141.00 from yesterday’s close of 140.90/141.00 to the US dollars and lost ground to 140.98 when dollar sales by a state bank which usually acts for the monetary authority sold dollars.

The rupee recovered to 140.40 levels as exporters sold dollars.

Sri Lanka attempted to ‘float’ the rupee on September 04, after losing 440 million US dollars in reserves in August, but without raising policy rates and continuing to inject liquidity into money markets to de-stabilize the rupee.

Excess liquidity in interbank markets which was pushed up by money printing even after the attempted float dropped further to 48.5 billion rupees on Thursday from 63.95 billion a day earlier, indicating continuing reserve outflows.

Sri Lanka lost 34 percent of foreign reserves amid money printing and liquidity releases by the Central Bank which accommodated state salary hikes and subsidies over the past year, eventually spooking bond market investors.

The Central Bank had borrowed 1.5 billion US dollars from the Reserve Bank of India. (Colombo/Sept17/2015)

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