Sri Lanka floats the rupee; two way quotes return

Sept 03, 2007 (LBO) – Sri Lanka’s central bank has successfully floated the rupee after printing billions of rupees on an ill-fated intervention and sterilization adventure that nearly brought the national currency to its knees, analysts said. On August 23, the central bank stopped threatening dealers who were earlier labeled as being anti-national and heavy intervention was eased, allowing the rate to adjust.

Some intervention was seen the following week, but the rupee now seems to be floating freely with exporters selling dollars, dealers said.

Two-way quotes by single market participants stopped after the Central Bank started putting pressure on dealers, have now returned to the market.

A two-way quote with a bid and sell price, indicates that a dealer is willing to buy and sell at the same time.

On Friday there was enough liquidity for state banks to buy in the market as exporters sold.

On Monday two-way quotes were seen for the spot dollar around 113.00/05 with some trades at 113.02.

“There doesn’t seem to be much pressure,” a dealer told LBO. “New York markets are closed so activity is quiet today.”

On Thursday bank treasurers met Central Bank officials who encouraged normal activities in the forex m