Sri Lanka money rates fall from record highs

March 27, 2007 (LBO) – The inter-bank call market call rates eased to 35 percent Wednesday, a day after rates hit a record 50 percent, dealer said. “Liquidity is a little bit tight but over the next couple of days might money ease,” a dealer said.

The Central Bank is expected to inject cash on a longer term basis to the market by increasing it Treasury bill holdings at today’s auction.

Though the bank has announced a pre-determined reserve money growth path, from late March through April more money has to be injected into the banking system to make up for large cash draw downs ahead of the Sinhala and Tamil New Year.

Dealers said the two state commercial banks, were pretty much short and remained on the borrowing side.

Dealers said the market might stay within the 20-30 percent levels.

The Central Bank is expected to keep its tight path in the coming weeks with no reverse repo auctions, though money would be pumped into the market through Treasury bill purchases to match the seasonal drawdown.

In the foreign exchange market, traders said the dollar was easing slightly to 108.98 rupees as there was no rush to convert to rupees with money rates coming down.

“The pressure on the dollar–rupee rate has eased because the call money rates are down from their high of 50 percent. Money at 50 percent is very costly. That’s why people sold dollars yesterday.”

Equity markets opened marginally lower amidst thin trading.