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FINANCIAL CHRONICLE™ » CORPORATE CHRONICLE™ » Inflows dry up, another $7M to protect rupee

Inflows dry up, another $7M to protect rupee

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Melissa Pereira


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

Taxpayers' money to the tune of US$ 7.45 million were drained off from Central Bank's (CB's) foreign reserves at yesterday's trading due to CB's continuous protection of the rupee from depreciating figure.
In the two days to yesterday, the total value of such drain offs is $ 26.85 million. Conversions are made, based on the current, administered spot price of Rs 133.70 to the US Dollar.

As a result, Rs 996.15 million worth of excess liquidity was drained off from the money market yesterday, taking up the drying up of excess liquidity in the two days to yesterday to Rs 3.6 billion.

Nevertheless, with excess liquidity at Rs 122.5 billion as at yesterday, the weighted average rate of call money fell by one basis point to 6.11%, while that of overnight market repo transactions remained unchanged at 5.79%. Meanwhile, 49.22% of this excess liquidity comprises CB's buying of Treasury (T) Bill holdings (Rs 60.31 billion), ie lending printed money to the government. CB uplifting excess liquidity this way may cause demand side inflationary pressure on the economy, thereby hurting the poor and the fixed wage earner the hardest.


The ideal way to boost excess liquidity is to encourage inflows. However, inflows have dried up due to the current political instability facing the country.

Courtesy: Ceylon Financial Times 22 May 2015

Teller

Teller
Moderator
Moderator

How long can they manage this? this will blast at any time and rupee will slip to 142/- levels against 1 USD. Then country will face another big problem. Government will loose 2 way on oil imports. One is currency depreciation other tging is oil price is increasing in world market. Billions of rupees will loose in both sides.

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