Sri Lanka rupee falls 3 pct to record low after c.bank floats – dealers
Posted on September 4th, 2015

Courtesy Adaderana

Sri Lanka’s rupee currency fell over 3 percent to trade at a record low of 139.00 per dollar on Friday after the central bank effectively floated the currency by ceasing to quote its own reference rate.

The slide comes amid weakness in emerging markets triggered by a devaluation of the Chinese yuan. It came with a delay, though, after the central bank supported the rupee before and after a general election on Aug. 17 that was won by a pro-reform coalition.

The central bank’s move came a day after it received $1.1 billion from a $1.5 billion swap agreement with the Reserve Bank of India (RBI).

This correction is probably overdue by 2-3 months. They might have waited till the inflows come in from the RBI swap arrangement and reach political stability,” said Shiran Fernando, an economist at Colombo-based Frontier Research.

The rupee was quoted between 136.50 and 139.00 per dollar from Thursday’s close of 134.75, dealers said.

I don’t think it will go beyond 139.00 because the central bank will intervene to curb excess volatility and the market will correct by itself,” one dealer said.

Sri Lanka’s central bank had propped up the rupee around the election, at a time when regional peers were falling. The market had expected a correction after the polls won by the ruling United National Party.

In contrast, the Indian rupee has fallen around 3.9 percent, the Malaysian ringgit by 8 percent, while Indonesia’s rupiah has fallen 4.5 percent since China devalued the yuan on Aug. 11.

The central bank usually directs the market through state banks trading the dollar. The rupee has fallen 5.6 percent so far this year against the U.S. currency.

The central bank told forex dealers at a meeting on Thursday that it would allow the rupee to float from Friday, according to sources aware of the meeting’s proceedings. (Editing by Douglas Busvine and Simon Cameron-Moore)

Reuters

2 Responses to “Sri Lanka rupee falls 3 pct to record low after c.bank floats – dealers”

  1. Lorenzo Says:

    SL going bust.

    More on the way as JUMBO ministers start their JUMBO CORRUPTION.

    According to estimates 25 BILLION rupees were spent on election by UNP. For an INVESTMENT of that level of RISK, you expect a return of 50% at least. So expect a corruption bill of 45 billion rupees at least in the first year.

  2. aloy Says:

    SL Rupee falls against the US dollar. So are almost all currencies. US dollar has appreciated by about 20% against the Singapore dollar over a period of about a year. I do not think we need to worry so much about this. However we need to worry about one thing. That is the effect of falling oil prices as our inflow of forex comes from ME countries from the earnings of expatriates. If fuel prices in SL is also reduced further in keeping with a price formula the GOSL will have a difficulty in balancing the outward payments.

    On a different note, I was listening to the U-tube giving Hon. Dinesh G’s speech in parliament ( due to insistence of my wife this morning). With due respect I must say I totally disagree with the scare story as told by him. It is true that the Chinese government pumped in several hundred billion dollars in to the stock market in order to stabilize the Chinese stocks. But the US government never pumped in several thousand trillions of dollars to their stock market as alleged by Hon. Dinesh. I think the economic experts of RW’s government should contest the contents of the scary side of his speech as it is not true according to what I hear from BBC almost every hour during the past few weeks.

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