COLOMBO (EconomyNext) – Sri Lanka’s official intervention rate was allowed to fall 20 cents to 134.20 to the US dollar Thursday in the spot market amid continued bond sales by foreign investors, dealers said.
In the forward markets one month dollars also rose but was capped by moral suasion at 136.04 rupees and the one month a 134.90, dealers said.
Sri Lanka’s rupee came under pressure from an expanding current state spending, and liquidity releases into the interbank market which was worsened by a rate cut in April 2015, amid warnings that monetary policy should not be loosened when fiscal policy was already loose.
From mid-May, foreign investors have started to sell rupee bonds actively, adding to pressure on domestic credit markets.
Sri Lanka is now highly exposed to international markets and fiscal risks taken in the past cannot now be followed, analysts say.
Sri Lanka Thursday called bids to sell 100 million US dollars in 1,3 or 5-year bonds which will pay a floating rate above the London Interbank Offered Rate.
The External Resources Department, of Sri Lanka’s planning ministry has separately requested proposals for at least 500 million US dollars through a term loan.