Sri Lanka central bank will not intervene at fixed price: CB Governor

Feb 09, 2012 (LBO) – Sri Lanka’s Central Bank will not intervene at a fixed price but will continue to supply part of the dollars needed to settle petroleum bills Governor Nivard Cabraal said after a trading band was removed Thursday. The International Monetary Fund has called for greater flexibility in forex markets to protect reserves which fell to around six billion dollars by December 2012 from a peak of 8.1 billion dollars in July.

The central bank stepped back from intervening within a fixed band earlier on Thursday after weakening the band by 30 cents to 114.60 rupees in the spot dollar market.

“We are going to intervene with quantity. It will not be based on the price,” Governor Cabraal said.

“We will supply a part of the oil bills as our interventions. The rest of the market will be determined by its mechanism.”

The Sri Lanka rupee floated at levels between 115.90 to 115.10 against the greenback, shortly after the Central Bank lifted its trading band, Thursday.

Sri Lanka’s rupee peg has come under pressure from high credit growth and the Central Bank has put a limit of 18 percent growth for 2012.