Mar 11, 2010 (LBO) – Sri Lanka rupee strengthened to 114.0 to the greenback with the spot dollar quoted at 113.95/114.05 with banks unwilling to hold dollars with high short term rupee interest rates, and the central bank staying in the sidelines, dealers said. On Wednesday the central bank rejected bids for an entire Treasury bill auction of 10.5 billion rupees.
Overnight money rates are now around 9.25 percent.
Earlier in the week, overnight rates tightened with state bank borrowing aggressively but the pressure has since eased, dealer said.
Excess liquidity has been rising in the markets and the central bank has also stayed out of forex markets, allowing the rupee to go up. Central Bank purchases increase liquidity.
The semi-official pegged rates is now around 113.95/45 dealers said.
Banks are also not carrying overnight positions on dollars, amid high rupee rates.