Sri Lanka rupee ends weaker, stocks down 0.35-pct
ECONOMYNEXT – The rupee closed weaker against the US dollar Monday despite the Central Bank last week slashing commercial bank overnight limits for the greenback to contain currency pressure, as stocks fell 0.35 percent amidst foreign selling in John Keells Holdings, brokers and dealers said.
The rupee closed at 162.35/50 rupees against the greenback, weakening from Friday’s closing of 162.00/20 rupees on importer demand, dealers said.
On Thursday the Central Bank tightened limits on overnight dollar holdings of commercial banks, called Net Open Positions (NOPs) to contain the recent pressure on the currency.
However, slashing dollar positions reduces the depth of the market and can worsen volatility. Excess liquidity in money markets went up sharply in recent weeks with money created from a currency swap, but it was not permanently sterilzied.
Analysts has who study the cenral bank has warned earlier not to purchase dollars from the Treasury in times of currency pressure.(Sri Lanka should stop surrendering Treasury dollar inflows to the Central Bank: Bellwether)
Purchasing or swapping dollars to create money and not defending the peg is the same as printing money through the acquisition of Treasury bills analysts say. In general terms creating rupees by defending a peg (either outright purchase of via swap) is not considered ‘printing’ because dollars available for defence. However if the dollars are not used to defend (or the rupees are not mopped up) the net effect is the same as printing money by acquiring T-bills.
The swap are expected to reversed shortly.
Overnight excess liquidity fell by 0.15 billion rupees on Monday to 15.77 billion rupees.
Gilt yields closed steady in the secondary market for government bonds.
A five-year bond maturing in 2023 closed at 9.97/10.03 percent in two-way quotes, narrowing from Friday’s closing of 9.96/10.04 percent.
A ten-year bond maturing in 2028 closed at 10.27/37 percent, up from 10.25/35 percent the previous close.
In equities, Colombo’s All Share closed 0.35 percent lower, down 21.35 points to 6,096.54, and the S&P SL20 of more liquid stocks closed 0.59 percent lower, down 19.05 points to 3,197.77, on selling interest in banking stocks.
Market turnover was 615.9 million rupees, up from the previous day’s turnover of 274 million rupees, as 73 stocks declined during the day against 48 that gained.
Net foreign selling was 112 million rupees, down from buying of 29.5 million rupees the previous day.
Foreign selling in John Keells Holdings was 187 million rupees. The stock closed 1 rupee lower at 137.20 rupees.
Distilleries (down 60 cents to 18.50 rupees), AIA Insurance (down 42 rupees to 906.20 rupees) weighed down the benchmark index amidst domestic selling in banking stocks.
DFCC Bank declined 4 rupees to 95 rupees, rupees and Sampath Bank ended 60 cents lower at 274.90 rupees.
Commercial Bank was down 90 cents to 123 rupees, and HNB closed 2.60 rupees lower at 222.20 rupees despite foreign buying of 67 million rupees in the banking stock.
Crossings, or off-market negotiated trades, amounted to 318.9 million rupees accounting for 51.7 percent of market turnover.
HNB had five crossings totalling 135.4 million rupees, Central Finance had two at 128.4 million rupees and Sampath Bank also had two crossings worth 55 million rupees.
Central Finance gained 70 cents to close at 96.70 rupees. (COLOMBO, 10 September 2018)