ECONOMYNEXT – Sri Lanka’s rupee was offered at 370 to the US dollar for telegraphic transfers for small transactions while larger deals went at higher rates near 380 to the US dollar market participants said.
UAE exchange houses were offering a Dirham for around 102 rupees (375 rupees per dollar), which will help drive more remittances to official channels, market participants said.
Sri Lanka’s new Central Bank Governor Nandalal Weerasinghe jacked up policy rates to 14.50 percent from 7.50 percent and also allowed Treasury bill yields to rise which would eventually slow private credit and investment and imports.
The falling rupee had also impoverished the population of the island which will reduce consumption and support the rupee as long as not new money is printed.
Sri Lanka’s rupee fell steeply after an attempted float in March due to low policy rates and a surrender rule. Electricity prices were also not raised, driving bank credit up with losses, unlike a float in 2012 after printing money.
There was hardly any activity in the interbank market.
In debt markets a bond maturing on 01.5.27 was quoted at 21.30/22.10 per cent.
At Wednesday’s Treauries auction yields stabilized with strong demand from genuine buyers, dealer said.
Sri Lanka is facing the worst currency crisis in its history after two years of money printing to keep rates down.
Sri Lanka is facing the worst currency crises triggered by the island’s economists who maintain an intermediate regime central bank after it attempted to target an output gap. (Colombo/May 05/2022)