Saturday September 21, 2019 07:59:07
ECONOMYNEXT – Sri Lanka’s rupee closed below 181 to the US dollar on Friday, despite foreign investors sales falling, official data showed.
Foreign investor held bonds barely fell, ending the week at 109.6 billion rupees in the week to September 18, down from 110.2 billion rupees a week earlier.
Data for Friday bond sales were not available.
The rupee closed around 181 to the US dollar after a spike in unsterilized excess liquidity.
Excess liquidity shot up with banks depositing over 70 billion rupees at the central bank over the week.
The central bank intervenes in forex markets and buys dollars at the drop of a hat, especially from the Treasury, without waiting for a ‘disorderly appreciation’ appreciation of the rupee, injecting base money, pegging the rupee and generating liquidity shocks, analysts have pointed out.
Excess liquidity from dollar purchases are then left unsterilized for a long period.