ECONOMYNEXT – Sri Lanka’s commercial banks quoted the rupee at between 375-380 to the dollar for telegraphic transactions on Thursday (11) while bond maturities were inactive ahead the 35 billion bond auction today, participants said.
The central bank’s indicative spot was quoted at 360.00 against the US dollar on Thursday, up from 364.76 against the US dollar on Wednesday.
At the time of filing, central bank had not published the TT rate for Thursday. The last quoted TT rate of central bank was 361.7/374.9 against the US dollar.
The kerb market ended the week at around 397/400 to the US dollar on May 07.
In debt markets, only bills were active as the market is waiting for the bond auction results, market participants said.
The three-month bill was quoted at 23.00/24.00 percent on Thursday, up from 22.50/24.50 percent on Wednesday.
The 12-month bill was quoted at 24.00/25.00 percent on Thursday, up from 23.75/24.75 percent at the previous day’s close.
Today, the debt office is offering 35 billion rupees to be sold in bonds.
At this week’s bills auction, the debt office offered 92.5 billion rupees and sold 85.39 billion rupees while the bill yield moved.
The weighted average yields of three-month bills moved by 59 basis points, six months up by 84 basis points and the 1-year advanced 58 basis points.
Newly appointed central bank Governor Nandalal Weerasinghe who had already hiked rates to slow credit and limited money printing to stabilize the broken soft peg, warned he would resign if a government was not formed quickly to provide political stability.
The governor immediately after being appointed jacked-up policy rates to 14.50 percent from 7.50 percent and also allowed Treasury bill yields to rise which would eventually slow private credit and investment and imports.
The falling rupee had also impoverished the population of the island which will reduce consumption and support the rupee as long as not new money is printed.
Sri Lanka’s rupee fell steeply after an attempted float in March due to low policy rates and a surrender rule. Electricity prices were also not raised, driving bank credit up with losses, unlike a float in 2012 after printing money. (COLOMBO/May12/2022)