Rupee edges up as tight liquidity prompts dollar sales

Reuters: The Sri Lankan rupee ended slightly firmer on Friday, after four straight sessions of losses, as tight rupee liquidity triggered dollar sales by some banks, dealers said.

The spot rupee closed at 146.85/95 per dollar, compared with Thursday’s close of 146.90/147.00. The rupee fell 0.65% this week.

“A few banks sold dollars due to tight rupee liquidity following yesterday’s bond auction,” a currency dealer said, asking not to be named.

Sri Lanka’s Central Bank said it accepted Rs. 55 b rupees at 8.50% at its reverse repo auction held on Friday, through which it absorbs liquidity from the banking system.

The Central Bank’s decision on Wednesday to hold key monetary policy rates steady suggested that policy makers were keen to support a slowing economy even as they kept a tight leash on rampant credit growth, analysts said.

After the rate decision, treasury bill yields dipped between 16 and 33 basis points.

The Central Bank is under pressure from the International Monetary Fund to continue rebuilding international reserves and maintain exchange rate flexibility to develop the foreign exchange market further.