Sri Lanka rupee down to new record low of amid excess liquidity

ECONOMYNEXT – Sri Lanka’s rupee fell to a new record low of 142.25 against the US dollar in the spot forex market Friday dealers said, as excess liquidity continued to pressure the currency.

The rupee was quoted around 142.10/20 levels in afternoon trade, down from 142.00 levels yesterday. It closed stronger at 140/05  following bank dollar sales.

The rupee failed to get any benefit from a 1.5 billion US dollar bond. A part of the proceeds were converted and a part was sterilized and taken into reserves.

In the two weeks to November 02, before the dollar proceeds were converted, more liquidity was pumped into the banking system by repaying maturing Treasury bills with printed money.

Analysts had warned that Sri Lanka’s exchange and monetary policy is inherently set against the currency.

Some of the bond proceeds were sterilized and taken into forex reserves.

In the past 10 days, about a 100 million dollars had been spent.

In bond markets, yields eased a little Friday, after increasing throughout the week dealers said.

A two year maturing on 15.07.2015 was quoted at 7.25/40 down from 7.40/50 levels a day earlier.

A 4-year bond maturing on 15.09.2015 8.55/60 percent down from 8.65/70 percent.

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A 10-year bond maturing on 01.08.2025 was quoted at 9.15/30 down from yesterday’s closing of 9.35/40 yesterday.

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