CB watches over rupee trends
View(s):The Central Bank (CB), in a bid to curb volatility in the US dollar, has begun monitoring all bills and trades to ascertain the reason for a depreciating Sri Lanka rupee.
While the CB has assured of sufficient foreign reserves in an effort to stabilise the market, money market dealers say the fluctuations are essentially due to a supply and demand scenario.
On Friday, the dollar was pegged at Rs. 157.90-Rs. 158 after hitting a high of Rs. 159 in the past 10 days.
On Wednesday, the CB said in a ‘reassuring’ media release that gross external reserves are expected to hit a record $11 billion by mid-June. On the same day, it withdrew intervening in the market. However , it is learnt that the International Monetary Fund has urged Sri Lanka to refrain from using foreign reserves to defend the rupee.
Since early May, the CB has been pumping dollars in to the market to curb volatility which hasn’t had much of an impact though. Dealers said larger quantities need to be used to contain the depreciating rupee otherwise the dollar rebounds.
Demand for dollars is largely due to exits from debt and equity by foreigners while exporters, expecting the dollar to further progress, are keeping their proceeds abroad for the maximum prescribed 120 days.