Sri Lanka rupee stronger, stocks close down

Dec 21, 2012 (LBO) – Sri Lanka’s stocks closed down 0.2 percent Friday with foreign interest in key large cap stocks and the rupee extended gains for the second day, dealers and brokers said. In December the Central Bank has settled some of its bill holdings despite injecting liquidity.

Analysts have said Sri Lanka has a flawed, so-called soft peg built by US interventionists which is prone to balance of payments crises and high inflation. The benchmark Colombo All Share Price Index closed at 5516.49 down 10.8 points and the
S&P SL 20 Index closed at 3,034 up 3.38 points or 0.11 percent.

In forex markets the rupee gained to around 127.00/10 to the US dollar in late trading Friday against 127.60 levels Thursday. During the day the rupee rose to as much as 125.60/60 before falling back.

The currency usually strengthens in December amid stronger inflows and weak credit, though the Central Bank purchases dollars to stop in appreciating.

The rupee has been steadily appreciating from its weakest level of 134 to the US dollar in mid 2012 after a peg at 110 rupees to the dollar broke due to sterilized foreign exchange sales.