Sri Lanka rupee weaker, bonds flat

Aug 27, 2013 (LBO) – Sri Lanka’s rupee weakened below 133 to the US dollar Tuesday and bond were flat amid jitters in international forex markets, dealers said. The rupee weakened to 133.05/10 levels to the US dollar in the spot next market, where settlement is made three days later, weakening from 132.90/133.00 Monday.

Exporters were selling dollars sparingly, dealers said slightly pressuring the rupee.

Analysts say there is not much underlying pressure from central bank liquidity injections to pressure the currency in Sri Lanka unlike in countries like Turkey and India.

Sri Lanka’s credit growth is weak and pullouts from gilt markets have not been as heavy as other countries. Authorities have said that bond sales have been generally matched with purchases later.

In gilt markets, a bond maturing in April 2018 was quoted at 11.73/78 percent Tuesday almost unchanged form a day earlier.

India’s rupee continued to take a beating hitting a fresh low while the government planned a food subsidy scheme.

Currency depreciation puts inflation up, hurting the poor further and any central bank accommodated subsidies can further pressure the rupee and push up the prices of all goods including non foods, reducing the amount of money available for food.

Analysts say India’s policy mis-steps have always had a detrimental effect on Sri Lanka as the island’s elected rulers and bureaucrats tends to parrot the country rather than better managed free countries.

Sri Lanka’s state run National Savings Bank which is on a road show may raise at least 500 million US dollars next week depending on market conditions.

Interest rates are elevated in international capital markets and Sri Lanka’s sovereign bonds are also being quoted close to 7 percent from 6 percent levels earlier.