Sri Lanka rupee at 270/280 to US dollar, kerb market weakens

Sri Lanka’s rupee was quoted at 270/280 to the US dollar Monday as the rupee was allowed to fall in as bid to get the currency to float up from Friday’s close of 255/265.

In late afternoon trade the rupee was quoted at 270/280 to the US dollar.

Though there was an increase in remittances initially after rupee was allowed to fall according to monetary policy in a bid to establish a float.

In the kerb market the US dollar was quoted at 282/290 rupees.

On Monday a deals were done around 264.97/99 to establish a rate, market participants said.

Commercial banks were quoting 255 to buy dollars from telegraphic transfer and sell at 265 for customers on Monday.

There is still no active float (full suspension of convertibility) and the central bank has imposed a surrender requirement which weakens the currency and goes against a float, analysts have said.

Since early 2020 Sri Lanka printed money under so-called Modern Monetary Theory to bring down interest rates and create a ‘production economy’ after tax cuts widened a budget deficit.

Sri Lanka also imposed yield ceilings on bond auctions scuttling them in the process.

In bond markets only two maturities from Friday’s auction was active.

A bond maturing 01.08.2024 was quoted at 14.77/82 percent down from 14.85/15.00 on Friday after the auction.

A bond maturing 05.06.2027 was quoted at 15.10/20 percent from 15.15/15.30 on Friday.

“At these levels the market is prepared for a rate hike,” a dealer said. 

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