Rupee to show ‘stable’ behaviour in coming months: CB Chief
Saturday, 5 October 2013 00:00
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Governor says steps taken to deal with volatility
Rupee hit record low of 135.20 per dollar on 28 August
IMF concerned over CB intervention in rupee
(Reuters): Sri Lanka’s currency will “behave in a stable manner” in the next few months as the Central Bank has taken steps needed to deal with a volatile environment, Governor Ajith Nivard Cabraal said Friday.
The Sri Lankan rupee hit a record low of Rs. 135.20 against the US dollar on 28 August, but since then has risen 3.2%, helped by inflows from a corporate bond.
On Friday, it was trading at Rs. 131.30/50 per dollar, near its 2-1/2-month high.
“We have had a long-term view. We have taken steps which are needed in a volatile environment,” Cabraal told Reuters in an interview. In the next few months, “we are confident that the rupee’s behaviour will be of a stable manner, we have factored in most of the external and internal factors,” the Governor said.
The International Monetary Fund on Wednesday raised concerns over repeated intervention in the foreign exchange market to stabilise the rupee and urged the central bank to limit its intervention “to dealing with excessive short term volatility”.
The monetary authority intervenes in the market to prevent sharp volatility in the rupee.
Currency dealers expect the rupee to gain further as they anticipated a private bank will issue a dollar-denominated corporate bond raising at least $ 250 million.
Cabraal said he does not feel the rupee needs an appreciating trend. “I see it is at a stable position. It can trade in a certain band. It can appreciate within that band,” he said without elaborating on the Central Bank’s band.
Since February 2012, the central bank has allowed greater flexibility in rupee trading.
Between early July and mid-August, the rupee fell 4% as some foreign investors sold local bonds as US Treasury yields rose in anticipation the US Federal Reserve would start trimming its stimulus.
The currency, which depreciated about 10% in 2012, has weakened 2.7% this year.
