Header Ad

Sri Lanka rupee up on bank selling

ECONOMYNEXT – Sri Lanka’s rupee appreciated to 143.80/90 to the US dollar in the spot market Friday after opening at 143.90/144.10 levels amid bank selling, dealers said.

Exporters however are not converting actively, market participants said.

December data showed that the Central Bank was continuing interventions to mop up some of the money printed while also allowing the rupee to fall from the pressure of the liquidity created.

In a Reserve Bank of Zimbabwe style move Sri Lanka’s central bank was also seen mopping up the liquidity it had created by purchasing Treasury bills through short term auction in money markets.

On January 16, the Central Bank will increase its statutory reserve ratio (SRR), allowing more than 40 billion rupees of printed money to be mopped up at no cost to itself, but at the cost of higher intermediation cost to banks, which is a type of tax on the bank.

Raising SRR is an archaic move which had been abandoned by most low inflation central banks of the world.

Latest Comments

Your email address will not be published. Required fields are marked *