Rupee will recover substantially – Cabraal

Monday, 19 March 2012 00:00 -     - {{hitsCtrl.values.hits}}

 Reuters: Sri Lanka’s rupee currency will recover substantially due to dollar inflows into the island nation’s stocks, government securities, banks, and a hotel project, Central Bank Governor Ajith Nivard Cabraal said on Friday.

The rupee hit a record low of 125.30 on Friday mainly due to importer dollar demand ahead of the April festive season, and the market has been expecting further depreciation due to a lack of foreign inflows and rising global oil prices.

At least $365 million from offshore is expected in Sri Lanka by the end of the month, Cabraal said.

“We have seen many inflows, which will be quite substantial this month,” Cabraal told Reuters. “We see the recovery as substantial. All these fellows buying 125 rupees for a dollar will be quite sad finally when they see what is happening.”

He declined to specify the level where the central bank expected the rupee to settle.

Both Commercial Bank of Ceylon and Sampath Bank are expected to bring in a total of around $125 million for capital requirements, while a Middle East bank will invest $50 million in Sri Lanka’s treasury securities, Cabraal said.

“All this money will come within two to three days,” he said.

Apart from that, a $120 million inflow into equities from share deal by Malaysia’s state investment arm, Khazanah Nasional, which was done on Friday and another $75 million for land acquisition by an Indian firm for a hotel project are also expected.

“We know inside out and we know what is coming. Sometimes it may be two or three days later. We have cautioned the market and told them that the inflows will come in and the rupee will stabilise,” Cabraal said.

The central bank raised policy rates 50 basis points in February, its first rate hike since 2007, and allowed a market-determined exchange rate to discourage imports to help tackle a record high trade deficit and avert a balance-of-payments crisis this year.