Dont Worry

After rising against the dollar, the rupee lost around 1 percent, as the markets panicked over a snap poll.rn

rnldblquote The rise was largely attributed to a lack in investor confidence since the political crisis blew up last Nov.,
dblquote he said addressing a gathering at the opening of the Colombo Stock Exchanges new debt trading system on Wed.rn

rnSince last Thu., the rupee has come down from 99.00 levels against the dollar to 96.75, as the Treasury deftly channels big import bills through the two-state. banks.rn

rnldblquote Most of the dollar sales were due to speculation,” said Central Bank Governor, A S Jayawardene.rn

rnExporters, who earlier held on to their dollars, due to the political rumpus, have now started converting their proceeds to take advantage of the better rupee rate, he explained. rn

rnDealers said an absence of importer demand – the main driver of the greenback – also helped the rupee. rn

rnldblquote Its now a correction of a panic situation’85.a sign of a maturing market,
dblquote Jayawardene said.rn

rnThe overnight call money rate remained stable at 7.5 percent as the money market surplus almost halved to around Rs. 4 bn, bn due to some large withdrawals amid election campaigning.rn

rnYields in the secondary government bond market were steady – with most tenures between 8.16 percent and 8.38 percent – but dealers said investor sentiment was further damped after a recent fiscal report pointed to a higher deficit and increased borrowing.rn

rnBut Choksy said the government is still pursuing a low interest rate policy and is doing its best to keep rates at current levels.rn

rnTreasury bill yields at Wed.s auction remained flat, with only three-month papers moving up marginally by one basis point to 7.70 percent.rn

rnThe Central Bank offered and accepted Rs. 4.260 bn worth of bills, though there were bids for Rs. 10.836 bn.rn

rnSix-month yields slipped one basis point to 7.66 percent and one-year paper remained flat at 7.69 percent.rn

rn”There may be some selling in the next few days, but overall there is no need to panic over the new borrowing position,” Jayawardene said.rn

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-LBO Newsdesk: LBOEmail@vanguardlanka.comrn

Finance Minister K N Choksy came out strongly to defend the money and capital markets saying the recent spikes would ease up in the run up to April polls.