Sri Lanka Central Bank in a sudden policy shift has intervened in the forex markets to defend the rupee, Central Bank Governor Indrajit Coomaraswamy said recently.
"In recent days we have seen pressure in the FX market but the underlying fundamentals do not explain this pressure so that may be short-lived” , he said adding that there may be other ‘non-economic’ factors disturbing the market.
Governor Coomaraswamy noted that there were about the equivalent of 700 million US dollars of rupee bonds in the hands of foreign investors some of whom have begun to sell.
According to recent Central Bank’s economic out look, given the cross currency exchange rate movements, the Sri Lanka rupee appreciated against the pound sterling (5.3 per cent), the euro (4.7 per cent) and the Indian rupee (3.7 per cent) while depreciated againstJapanese yen (2.5 per cent) during this period.
The total outstanding market liquidity was a deficit of Rs. 24.237 bn by end of the week, compared to a deficit of Rs. 9.146 bn by the end of last week.
The reserve money decreased compared to the previous week mainly due to the decrease in currency in circulation and deposits held by the commercial banks with the Central Bank.
The gross official reserves were estimated at US dollars 8.34 billion as at 31st July 2019.
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