Sri Lanka rupee weakens to 134.10 to dollar, stocks plunge
ECONOMYNEXT – Sri Lanka’s rupee weakened to 134.10 to the US dollar after authorities dropped the intervention rate by 10 cents Monday dealers said, while stocks plunged over 1.9 percent in morning trade.
There was heavy foreign selling in large cap stocks, brokers said, with the Colombo All Share Index down 153 points in the first three hours of trading.
John Keells Holdings, Commercial Bank, Dialog, among key companies targeted by the UNP led administration with retrospective tax were among the most hurt.
There is no active trading in Sri Lanka’s forex markets but authorities sell dollars for trade backed transactions if a bank cannot get dollars from customers, keeping the exchange rate peg at 134.10 to the US dollar.
On Monday 4.81 billion rupees was injected to money markets, lower than the 8.7 billion rupees injected on Friday.
The Central Bank’s Treasury bills stock, which is a proxy for money printing rose 87.5 billion rupees from 84.7 billion rupees a day earlier. Net excess liquidity rose to 41 billion rupees from 30 billion rupee a day earlier.
The rupee has come under pressure from rising credit demand from state and private borrowers and low interest rates, a problem Sri Lanka has suffered ever since the Central Bank was created in 1951.
On Monday August 31, the Central Bank is due to make a monetary policy announcement. Central Bank Governor Arjuna Mahendran was quoted as saying earlier, that rates may be cut after the elections in August.