Sri Lanka rupee retreats after early surge

  • Central bank cut banks’ net dollar opening positions
  • Move boosts liquidity by more than $30 million
  • Stx down; Volume, turnover lowest in two months (Adds rupee, stocks close)
 | Reuters
( 02 March 2012, Colombo, Sri Lanka Guardian)  Sri Lanka’s rupee rose sharply in early trade on Friday after the central bank slashed commercial banks’ net dollar opening positions, but retreated to close at marginally stronger.
The rupee touched 119.00 a dollar, a gain of 2.8 percent from Thursday’s close of 122.25/40, in early trading after the central bank’s order boosted dollar supply in the market. But by the close, it had retreated to 121.40/70, 0.7 percent firmer on the day but snapping a week-long weakening trend.
The central bank cut commercial banks’ net dollar opening positions to a third to square off banks’ deficit and surplus, A.A.M. Thasim, additional director at the central bank’s international operations department, told Reuters.
“Some banks with surplus dollars unwound their position in the early trade, but later the rupee fell due to importer dollar demand,” said a currency trader on condition of anonymity.
The central bank, after spending more than $2.7 billion in foreign exchange reserves in the second half of 2011 to fend off depreciation, last month changed its policy of protecting a specific exchange rate.
But it has intervened once already, pulled a handful of regulatory levers and engaged in moral suasion to keep the rupee from falling further.
The central bank wants to ensure foreign investors do not cash in the more than $2 billion they have placed in rupee-denominated securities.
A Reuters monthly forex poll on Wednesday forecast the rupee to fall as far as 128.50 by the end of August.
The rupee has fallen 5.7 percent since Feb. 9, when the central bank stopped defending it.
The stock market meanwhile closed down, hindered by as concerns over slowing economic growth, rising interest rates and broadly flat December quarter profits.
The main share index edged down 0.17 percent or 9.49 points to hit 5,460.19.
The cumulative December quarter earnings from 217 companies released so far is flat year-on-year, according to data from John Keells Stockbrokers.
“Interest rates are going up and companies are also feeling it,” Harsha Fernando, head of SC Securities, told Reuters. “I am very much concerned about the interest rates, because it will not encourage people to come to the market, it will affect companies’ performance.”
Foreign investors bought shares worth 95.6 million Sri Lanka rupees ($782,300), extending the offshore net foreign inflow to 2.31 billion rupees so far this year, after a net outflow of 19.1 billion last year.
The day’s turnover was 403.2 million rupees and the volume was 15 million, the lowest levels since early January.
The oil palms sector led the way down with 14.7 percent loss in Selinsing PLC.
The Colombo bourse is one of the worst performers this year among Asian markets, with a 9.96 percent loss while the majority have had positive returns. ($1 = 122.2000 Sri Lanka rupees)
(Reporting by Shihar Aneez and Ranga Sirilal; Editing by Bryson Hull)

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Author: Sri Lanka Guardian

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