Sri Lanka money market liquidity dries up

Sri Dharanee Performance Arts Theatre

Aug 21, 2012 (LBO) – Excess liquidity in Sri Lanka’s money markets which came from a unsterilized purchase of foreign exchange from a sovereign bond has largely dried up, tightening the monetary system. On Aug 21, excess liquidity in the banking system fell to 1.9 billion rupees from 12.9 billion rupees on Aug 14, amid unsterilized foreign exchange sales.

The weighted average overnight call money rate has edged up to about 10.55 percent from 10.48 percent from 10.48 percent at the beginning of the month.

The gilt backed repo rate has also move up to 9.56 percent levels from 9.46 percent levels at the beginning of the month.

On Wednesday the spot US dollar was quoted at 132.20/30 levels, overnight call at 10.50/55 and repo at 9.55/65, dealers said.

Analysts say if liquidity can be kept tight the rupee peg can tighten.