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| Sunday, 19 September 2004 |
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Rupee sliding by Chamitha Kuruppu The Sri Lankan rupee, which was stabilising over the last four weeks - following months of volatility is once again experiencing a downward trend. The rupee depreciated for the third consecutive day on Friday closing at 103.47 against the 103.28 on Thursday. Market sources attributed the weakening of the rupee to the increase in import demand. "This could be mainly due to trade bills brought in by importers," they said. Meanwhile, Assistant to the Governor of the Central Bank of Sri Lanka (CBSL), Y.W.M.B. Weerasekera, said that there was excessive volatility in the market. "This is a market determined rate. But the bank will intervene in the market to stabilise the volatility," Weerasekera told the Sunday Observer. Market analysts say that the rise in outflow of dollars in order to settle oil bills, along with a growing US dollar, has resulted in the sharp drop of the rupee. The US dollar recorded an all-time high of 104 rupees in August, 2004. Meanwhile, the Central Bank in its Monetary Review for the month of September stated that although the bank intervened in the foreign exchange market to reduce the excessive volatility in the exchange rate, the rupee depreciated by 6.2 per cent vis-…-vis the US dollar during the year upto August 2004. During this period, the rupee also depreciated against the Sterling pound (7%), the Japanese yen (3.9%), the euro (2.3%) and the Indian rupee (4.8%). Reflecting these currency movements, the 24 currency nominal effective exchange rate (NEER, 1999=100) depreciated by 5.1 per cent, while the 24 currency real effective exchange rate (REER, 1999=100) depreciated by 2.3 per cent by end August 2004. The instability of the rupee encouraged traders to increase prices of several essential goods recently including milk power, domestic LP gas and bus fares. |
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