Feb 16, 2012 (LBO) – Sri Lanka’s rupee closed at 119.0/15 against the greenback Thursday up from yesterday’s close of 119.40/55 in day of active trade, after opening at 119.40/65 dealers said. The currency fell as low as 120.00 to the greenback in intra-day trading triggering a sell-off. Some banks also appeared to have cut back on their long positions on dollars as the market became less uncertain, dealers said.
Sri Lanka’s central bank stopped intervention and allowed the currency moved towards a free float as liquidity injections to sterilize interventions put pressure on the currency.
The central bank has said it would continue to give reserves to settle a part of oil import bills, which analysts say may be source of pressure for currency if and when such interventions are sterilized with fresh liquidity.
Meanwhile the state has also raised fuel and power prices which will dampen domestic demand (purchasing power) in line with import prices of energy.