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Sri Lanka rupee trades in spot forex market; bank selling halts slide

ECONOMYNEXT – Sri Lanka’s rupee traded in the spot market Friday, falling as low as 144.50/90 levels to the US dollars until a bank started selling dollars, strengthening the currency to 144.20/40 levels, dealers said.

In the one week forward market the rupee weakened toward 145.00/15 levels until selling brought the currency back to 114.70/80 levels.

Sri Lanka’s spot market trades came to half amid heavy moral suasion by authorities, and banks were only trading in the forward market until today.

Bank who traded spot Friday are now waiting in fear expecting a shelling from authorities, market participants say.

In January car imports have come down and credit growth has also slowed, Central Bank’s head of economic research K M Siriwardene told reporters Thursday.

The central bank’s weekly Treasury bill auction has failed over the past two weeks. When a Treasury auction fails and the central bank buys bills with printed money, the newly injected demand creates excess credit and imports, regardless of any imports that come in.

With curbs on car loans, credit and printed money is expected to be directed to other areas and to imports which bring less revenue to the budget for each dollar spent on imports analysts say. (Colombo/Feb26/2016 – Update II)

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