Sri Lanka rupee falls to 139.95 to US dollar in spot forex market
ECONOMYNEXT – Sri Lanka’s rupee fell to a new low of 139.95/140.00 against the US dollar on forex markets in late morning trade Monday sharply lower from Friday’s dose of 139.30/50, dealers said, as authorities ratcheted up money printing last week.
Sri Lanka ended heavy interventions to maintain a soft-peg with the US dollar on September which could have ended a vicious cycle of sterilized interventions but money markets remain awashed with printed money.
Overnight money was quoted a 6.30/40 percent Monday and gilt backed repos were also quoted at the same rate after nearly 30 billion rupees of fresh money hit money markets last Friday from a repayment of Treasury bills with central bank credit.
Analysts had previously said that Sri Lanka’s rupee was at most danger after an attempted float because a cycle of partial intervention and full sterilization tends to occur during such periods.
This time sterilization is in excess of 100 percent due to outright debt monetization. (Colombo/Sept14/2015)