Home / Front Page/ CB to intervene if rupee moves on speculation

CB to intervene if rupee moves on speculation

Comments / {{hitsCtrl.values.hits}} Views / Saturday, 8 September 2018 00:10

Reuters: The Central Bank will intervene in the foreign exchange markets if its rupee currency moves for any reasons other than global trends, the Bank’s Senior Deputy Governor Nandalal Weerasinghe told Reuters on Friday.

Currency dealers have said the Central Bank had not intervened much to defend the currency, which has dropped 5.6% this year, even after it hit record lows for 13 straight sessions through Thursday.

On Thursday, the Central Bank cut net opening positions (NOP) of commercial banks after the rupee, which had weakened 1.2% last month, hit a record low of 162.65 against the dollar. The currency recovered after the Central Bank’s move.

“If we think it is moving due to several other reasons, rather than a global trend, obviously we will intervene,” Weerasinghe told Reuters in an interview. “We will intervene and we will bring any other measures we think appropriate.”

On Tuesday, the Junior Finance MinisterEran Wickramaratnesaid the Government would leave the level of its rupee to market forces to decide. However, banks have been building up reserves on speculation, Weerasinghe said.

“We have observed banks have been building up their positions and not converting (the dollars). Without any fundamental reasons, there is no reason to build up reserves.”

The Government has not been influencing or intervening in the foreign exchange management of the Central Bank, he added.

“Whether to intervene or not, it is the responsibility of the Central Bank,” he said, adding that both depreciation and level of intervention has been lower in Sri Lanka than some other countries.

He also said there was no sharp decline in exporter conversions as claimed by currency dealers and the market had seen an average daily transaction volume of $ 80 million to $ 120 million.

Weerasinghe said Sri Lanka’s foreign exposure in the government securities was less than 6% of total Treasury bonds and bills.

Foreign investors have sold a net Rs. 46.9 billion ($ 289.6 million) worth of securities so far this year, Central Bank data showed.

Rupee edges down on importer dollar demand

Reuters: The rupee ended marginally weaker on Friday as importer dollar demand surpassed selling of the greenback by banks a day after the Central Bank cut net open positions of commercial banks to increase dollar liquidity, dealers said.

The local currency hit a fresh low of 162.65 per dollar on Thursday, hurt by stronger demand for the dollar from importers amid weakness in regional currencies, before the Central Bank cut the net open positions (NOP) of commercial banks forcing banks to sell dollars.

Central Bank Senior Deputy Governor Nandalal Weerasinghe on Friday said the monetary authority had observed commercial banks building up their positions without any fundamental reasons, which led to cut in NOP.

The currency, which hit a low of 162.05, was volatile on Friday and ended at 161.90/162.10, compared with Thursday’s close of 161.40/80. 

“Banks did not want to take risk after the Central Bank cut the NOP. The market was volatile as nobody wanted to take risk. They covered all the bills from the market instead of from their own reserves,” said a dealer, who requested anonymity. 

“We did not see exporters in the market. We saw some remittances but importer demand was there.” 

Junior Finance Minister Eran Wickramaratne on Tuesday told Reuters that the Government will leave the rupee for market forces to decide. 

The currency has weakened 1.2% last month and it has dropped 0.34% so far this month and 5.6% so far this year. The rupee will be under depreciation pressure with the year-end seasonal importer dollar demand, dealers added. 

The Sri Lankan currency is also hurt by weakness in the Indian rupee. India is Sri Lanka’s biggest trading partner and the Indian rupee, which also hit a record low on Thursday, has been one of the worst performers in Asia this year. 

Foreign investors bought government securities worth a net Rs. 578.3 million ($ 3.58 million) in the week ended 29 August, marking the first week of net buying since April. However, they have net sold Rs. 46.9 billion worth of securities so far this year, Central Bank data showed.

Share This Article


1. All comments will be moderated by the Daily FT Web Editor.

2. Comments that are abusive, obscene, incendiary, defamatory or irrelevant will not be published.

3. We may remove hyperlinks within comments.

4. Kindly use a genuine email ID and provide your name.

5. Spamming the comments section under different user names may result in being blacklisted.


Today's Columnists

Maximum Residue Level: Dilemma of agricultural product exporters in Sri Lanka

Wednesday, 19 September 2018

Due to increased emphasis on consumer health, majority of developed countries such as EU, Japan and the US insist on MRL testing of food items which has to be done by the exporter. The Codex Alimentarius Commission which is an inter-governmental bod

East Container Terminal blunder: Learn from Chinese

Tuesday, 18 September 2018

Minister for Ports and Shipping Mahinda Samarasinghe informed the press in August that Cabinet has approved the development of East Container Terminal (ECT) of Colombo Port by the Ports Authority. According to approval: nPorts Authority would develop

President Sirisena, playing with fire, must take note that smoke will get into his eyes

Tuesday, 18 September 2018

Penchant for playing with fire President Gamaralalage Sirisena has always had a penchant for playing with fire. He did fire-play at the local government elections when he made a disastrous U-turn and went round country blasting the party and its lea

Response to claims that Sri Lanka was in a ‘debt trap’ in 2014 due to ‘Chinese loans’

Monday, 17 September 2018

Several Western analysts have carried out a relentless media campaign in keeping with their own geopolitical agenda, to suggest that China was luring Sri Lanka into a carefully engineered debt trap.

Columnists More