Sri Lanka rupee touch 114.05 in tom trade; CB T-bill stock Rs162bn

Feb 05, 2009 (LBO) – The US dollar touched 114.05 rupees in active ‘value tomorrow’ dealing with a state bank on the buying side Thursday, despite official intervention at a lower rate on spot trades, dealers said. The spot dollar – which is settled two market days later – is closely watched by authorities, with a state bank that usually acts for the central bank offering dollars at 113.85 rupees for imports if documents can be shown.

In recent days dollars have been traded on value tom (settled one day later) or cash (same day settlement) at rates which represents a spot value above 114.00 rupees.

Dealers say a state bank bought tom dollars at 114.05 rupees, Thursday which is indicative of a corresponding spot rate of around 114.15 rupees to the dollar.

Higher levels of activity are seen in value tom deals in the market, dealers said. There was also activity in the forward market with market participants generating rupees through swap transactions.

The central bank’s Treasury bill stock, which represents injections made to sterilize interventions in the forex market, climbed to 162 billion rupees this week from 143 billion at the end of last year. It is also representative of foreign reserves losses.

At the end of November Sri Lanka’s official foreign reserves had fallen to 2.0 billion dollars. Since then the bill stock had climbed by more than 600 million US dollars, and the monetary base (reserve money) had hardly changed.

Economic analysts have pointed out that the liquidity injections (printed money) would put further pressure on the rupee. The current balance of payments problem began in mid-September 2008.

In debt markets the 4-year bond maturing on 15.04.12 spiked to 18.65 percent in early trade before settling around 18.35/45.

The 2-year bond maturing 01.08.10 traded around 18.45 percent and was quoted 18.40/50 later in the day.