Chaos as CB requests banks to stop quoting rupee spot rate

Reuters: The Sri Lankan rupee market came to a standstill on Tuesday as banks stopped quoting spot prices against the US dollar, after what dealers said was a request from the central to stop trading the ailing currency beyond the 133 level.

“The whole market is distorted as central bank does not like to see the spot trading above 133.00. So nobody is quoting spot and everybody quotes spot-next,” a dealer said on condition of anonymity, referring to the possible spot rate a day later.

Four other currency dealers confirmed the move and said there were no deals done in the market during the first two hours of the day.

The rupee’s spot-next was traded at 133.70/134.20 by 0500 GMT per dollar and closed at 133.60/80, dealers said.

Though many banks stopped quoting spot prices in early trade on Monday, the state bank dollar sale at 132.90 provided direction to the market and some banks traded spot at that rate.

Banks stopped quoting spot rates on Monday after the monetary authority had told the dealers not to trade above 133.00.

Central Bank Governor Ajith Nivard Cabraal declined to comment.

The rupee hit a record low of 133.60 on 12 June. It has lost some 17 per cent of its value since last November.

The Colombo Stock Exchange’s main index edged down 0.44 points to 4,989.99, its lowest since 14 June.

Turnover was Rs. 8.08 billion ($60.52 million), more than eight times higher than this year’s daily average turnover of Rs. 990.1 million, boosted by several block deals in conglomerate Aitken Spence.

Spence, which accounted for 87% of the total day’s turnover, closed steady at Rs. 111.

Foreign investors were net buyers of Rs. 685.9 million worth of shares on Tuesday, extending the net foreign inflow so far this year to Rs. 23.32 billion.