Sri Lanka’s rupee depreciated sharply to 292.70/293.00 to the US dollar in the spot market, down from 291.25/50 to the US dollar the previous day, while bond yields increased, according to dealers.
Analysts had warned that allowing excess liquidity to build up, especially through the acquisition of dollars, could weaken the currency when the funds are used for imports, driving up domestic prices due to higher demand. If central bank dollar-rupee swaps push up domestic demand and credit, the same outcome could occur, as there is no clear commitment to defend the currency under a flexible exchange rate system.
Flexible exchange rates, combined with money printing aimed at meeting high cost of living targets, have led to social unrest and sovereign defaults in countries with reserve-collecting central banks.
In the bond market, a bond maturing on 15.09.2027 was quoted at 9.75/80 percent, while one maturing on 15.02.2028 was quoted at 10.10/15 percent. A bond maturing on 01.05.2028 remained stable at 10.20/25 percent, and a bond maturing on 15.09.2029 was quoted at 10.65/70 percent.
In equities, the All Share Price Index rose 0.48 percent, or 58.32 points, to 14,672, while the more liquid S&P SL20 gained 0.56 percent, or 24.69 points, to 4,428. Turnover was recorded at 708 million rupees.