CB buying dollars to build foreign reserves
Sri Lanka Central Bank will continue buying of dollars from the market to strengthen the buffers in order to build reserves for themselves or provide them to the country’s banks. The aim is often to stabilise the exchange rate, Central Bank sources said.
It has done away with fixed exchange rate, of around Rs.360 to the US dollar allowing the rupee to trade more freely with effect from Tuesday (March 7).
Soon after easing these restrictions, the Central Bank has purchased US$140 million from the commercial banking system and was likely to have bought $500 million from the forex market this week.
The aim of the monetary authority is to build up the buffers and maintain flexible exchange rate system where the Central Bank takes measures to stabilise volatile movement by intervention, a senior Treasury official told the Business Times.
The money exchange market in Negombo, the biggest money changers in the island, has witnessed the highest volatility of Rs 310-300 to the dollar this week, several authorised money dealers in the forex market said.
Therefore it will become a difficult task to prevent the fall of the rupee value to the dollar at around Rs 300 in the Sri Lanka interbank exchange, several money market analysts observed.
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