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* Cenbank changes its intervention method in fx market
* Cbank sold $17 mln to defend rupee before stopping intervention
* Bourse down rates, depreciation concerns, margin call
COLOMBO, Feb 9 (Reuters) - Sri Lanka's rupee currency weakened 0.8 percent on Thursday as the central bank said it would change the way it intervenes in the foreign exchange market after spending more than $2.7 billion to defend the currency since July.
In a marked policy shift, the central bank said it would allow the market to determine the currency's rate rather than intervening to defend the rupee at a particular level. Instead, it will intervene only to ensure there are enough dollars in the market for Sri Lanka to meet oil import costs.
The rupee ended weaker at 115.25 a dollar, its lowest since Aug. 18, from Wednesday's close of 114.30. It had touched 115.75 during the session, its lowest since May 18, 2009.
"The central bank stopped defending the rupee and it went up to 115.70/75 levels, but with banks selling dollars it came down to 115.25 levels," said a currency dealer who asked not to be named.
The central bank had weakened the rupee early in the day by 30 cents to 114.60 from Wednesday's close of 114.30 and defended it at that level, selling around $17 million, before announcing its change of policy, dealers said.
The central bank has spent $1.25 billion in 52 sessions since a 3 percent devaluation on Nov. 21 to curb a sharp rupee fall, despite the country facing a current account deficit and a balance-of-payments crisis. That policy had been criticised by the International Monetary Fund, among others.
Thursday's depreciation along with the central bank's decision last week to raise benchmark interest rates by 50 basis points, its first hike in five years, pulled stocks down to a fresh 1-1/2 year low.
The main share index fell 2.3 percent or 125.26 points to 5,316.99 - its lowest since August 2010 - erasing 46 billion Sri Lanka rupees ($402.59 million).
Retail investors sold shares to settle margin calls, while institutional investors stayed away from the market on concerns over interest rate hikes and rupee depreciation.
Despite the fall, foreign investors were net buyers of 103.7 million Sri Lanka rupees ($907,600) on Thursday, extending the foreign inflow to 593.3 million rupees worth of shares so far this year, after net outflows of 19.1 billion last year.
Sri Lanka's bourse is the worst performer among Asian markets with a 12.47 percent loss so far this year. It was 10th-best in 2011, after being on top in 2009 and 2010.
The day's turnover was 862.7 million rupees, far below last year's average turnover of 2.3 billion. Volume came to 38.3 million shares compared with last year's record daily average of 102.7 million.
(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Catherine Evans)
http://in.reuters.com/article/2012/02/09/markets-srilanka-idINL4E8D938420120209
* Cbank sold $17 mln to defend rupee before stopping intervention
* Bourse down rates, depreciation concerns, margin call
COLOMBO, Feb 9 (Reuters) - Sri Lanka's rupee currency weakened 0.8 percent on Thursday as the central bank said it would change the way it intervenes in the foreign exchange market after spending more than $2.7 billion to defend the currency since July.
In a marked policy shift, the central bank said it would allow the market to determine the currency's rate rather than intervening to defend the rupee at a particular level. Instead, it will intervene only to ensure there are enough dollars in the market for Sri Lanka to meet oil import costs.
The rupee ended weaker at 115.25 a dollar, its lowest since Aug. 18, from Wednesday's close of 114.30. It had touched 115.75 during the session, its lowest since May 18, 2009.
"The central bank stopped defending the rupee and it went up to 115.70/75 levels, but with banks selling dollars it came down to 115.25 levels," said a currency dealer who asked not to be named.
The central bank had weakened the rupee early in the day by 30 cents to 114.60 from Wednesday's close of 114.30 and defended it at that level, selling around $17 million, before announcing its change of policy, dealers said.
The central bank has spent $1.25 billion in 52 sessions since a 3 percent devaluation on Nov. 21 to curb a sharp rupee fall, despite the country facing a current account deficit and a balance-of-payments crisis. That policy had been criticised by the International Monetary Fund, among others.
Thursday's depreciation along with the central bank's decision last week to raise benchmark interest rates by 50 basis points, its first hike in five years, pulled stocks down to a fresh 1-1/2 year low.
The main share index fell 2.3 percent or 125.26 points to 5,316.99 - its lowest since August 2010 - erasing 46 billion Sri Lanka rupees ($402.59 million).
Retail investors sold shares to settle margin calls, while institutional investors stayed away from the market on concerns over interest rate hikes and rupee depreciation.
Despite the fall, foreign investors were net buyers of 103.7 million Sri Lanka rupees ($907,600) on Thursday, extending the foreign inflow to 593.3 million rupees worth of shares so far this year, after net outflows of 19.1 billion last year.
Sri Lanka's bourse is the worst performer among Asian markets with a 12.47 percent loss so far this year. It was 10th-best in 2011, after being on top in 2009 and 2010.
The day's turnover was 862.7 million rupees, far below last year's average turnover of 2.3 billion. Volume came to 38.3 million shares compared with last year's record daily average of 102.7 million.
(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Catherine Evans)
http://in.reuters.com/article/2012/02/09/markets-srilanka-idINL4E8D938420120209
