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Sri Lanka rupee in one day gain to 195 to the US dollar, spot trades

ECONOMYNEXT – Sri Lanka’s rupee ended around 194.50/195.50 to the US dollar in the one week forward market Thursday with volatile trades at different levels after a state name which usually acts for the monetary authority sold dollars, dealers said.

A day earlier the rupee touched 200.50 to the US dollar in the one week market and closed around 199.00 to the US dollar.

The spot market also saw some activity.

The spot US dollar market has been inactive after the soft-dollar peg came under pressure from liquidity injections which started in late February.

On April 9 there were trades at various levels, ranging from close to 190 to 198 to the US dollar, dealers said.

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Sri Lanka rupee makes dizzy gains in intra-day trade towards 190 to dollar

While some of the money printed in recent weeks have gone to the hands of the people in a real demand for cash, large volume remain as excess liquidity to depress rates and pressure the currency, analysts say.

Banks deposited 84.1 billion rupees of excess liquidity in the central bank on April 09, down from 89.6 billion rupees, while the central banks Treasury bill stock went up to 263 billion rupees from 247 billion rupees.

In Sri Lanka liquidity injections weakens the rupee peg when the economy is recovering, but generates more trouble in times of external volatility, analysts have said.

Liquidity to hit the rupee may come from Treasury bill purchases or currency swaps, with the central bank as the dollar receiving counter party (buy spot-sell forward) of the type used by speculators in East Asia to hit currency pegs (Soros-style swaps) analysts have said.

In the secondary government securities market, yields edged up in moderate trade, while 2023 and 2024 maturities remained more liquid, dealers said.

A bond maturing on 01.05.2021 closed at 7.80/90 percent on Thursday, up 8.75/85 percent at Wednesday’s close.

A 2-year bond maturing on 01.10.2022 closed at 8.45/55 percent, up from 8.35/55 percent at Wednesday’s close.

A bond maturing on 01.09.2023 closed at 8.85/95 percent, from 8.70/90 percent at the previous close.

A bond maturing on 15.09.2024 closed at 9.00/9.10 percent on Thursday, climbing from 8.90/9.10 percent.

A bond maturing on 15.10.2027 closed at 9.30/40 percent up from 9.25/40 percent at Wednesday’s close.

A bond maturing on 15.05.2030 was not quoted.

A bond maturing on 15.09.2034 was not quoted. It closed at 10.00/40 percent in its last close on Friday. (Colombo/ Apr09/2020)

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