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Sri Lanka's central bank depreciated the rupee currency by another 20 cents on Monday for a second session, with the markets expecting more of the same as the central bank's rupee defence is running out of steam.
Monday's depreciation comes after the central bank surprised the markets by tightening monetary policy with a 50 basis point rate hike on Friday, and letting the rupee drop by 20 cents.
The rupee ended at 114.30 a dollar from Friday's close of 114.10, but still the central bank defended it by selling more than $30 million, dealers said.
"It should go at least to the 120 level for the central bank to not to intervene in the market," a currency dealer said on condition of anonymity.
Another dealer said at least a 3-4 percent devaluation is needed for the central bank to stop intervention.
Through Friday, the central bank had spent $1.2 billion in 49 sessions since a 3 percent devaluation on Nov. 21 to keep the rupee at 113.90, despite the country facing a current account deficit and balance-of-payments crisis.
The main share index ended 0.45 percent or 24.96 points weaker at 5,561.43, its lowest since Jan. 24 as retail investors booked profits with block deals pushing the turnover.
"Investors were reflecting selling sentiments on confidence about the market with the interest rate hike, and also on global aspects," said Kumuthini Sivathas, a research analyst at Asha Philip Securities in Colombo
http://www.reuters.com/article/2012/02/06/markets-srilanka-idUSL4E8D668120120206
Monday's depreciation comes after the central bank surprised the markets by tightening monetary policy with a 50 basis point rate hike on Friday, and letting the rupee drop by 20 cents.
The rupee ended at 114.30 a dollar from Friday's close of 114.10, but still the central bank defended it by selling more than $30 million, dealers said.
"It should go at least to the 120 level for the central bank to not to intervene in the market," a currency dealer said on condition of anonymity.
Another dealer said at least a 3-4 percent devaluation is needed for the central bank to stop intervention.
Through Friday, the central bank had spent $1.2 billion in 49 sessions since a 3 percent devaluation on Nov. 21 to keep the rupee at 113.90, despite the country facing a current account deficit and balance-of-payments crisis.
The main share index ended 0.45 percent or 24.96 points weaker at 5,561.43, its lowest since Jan. 24 as retail investors booked profits with block deals pushing the turnover.
"Investors were reflecting selling sentiments on confidence about the market with the interest rate hike, and also on global aspects," said Kumuthini Sivathas, a research analyst at Asha Philip Securities in Colombo
http://www.reuters.com/article/2012/02/06/markets-srilanka-idUSL4E8D668120120206
