Sri Lanka rupee weaker on state bank raising dollar peg

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Published: August 6, 2015 12:35:41 PM

The Sri Lankan rupee traded weaker on Thursday as a state-run bank, through which the central bank usually directs the market, raised the currency's peg against the dollar by 25 cents to allow the exchange rate to depreciate to 133.75, dealers said.

The Sri Lankan rupee  traded weaker on Thursday as a state-run bank, through which the central bank usually directs the market, raised the currency’s peg against the dollar by 25 cents to allow the exchange rate to depreciate to 133.75, dealers said.

Dealers said exporters sold dollars after the move, while importer demand for the greenback also was seen.

“Not clear what the intention is (of raising the peg), but it should go up with the import pressure,” said a currency dealer asking not to be named.

One of the two state banks started to sell dollars at 133.75 rupee in the market, ending the rupee’s two straight steady sessions, they said.

On Monday, the state-owned bank had cut the currency’s peg to the dollar by 10 cents to 133.50.

The rupee ended at 133.50/60 per dollar on Wednesday.

Some dealers expect the currency to be less volatile until the Aug. 17 parliamentary elections.

Sri Lankan shares rose to their highest in more than six months on hopes of political stability after the Aug. 17 parliamentary elections and better earnings in the April-June quarter, brokers said.

The main stock index was up 0.11 percent at 7,374.53 by 0638 GMT, its highest since Jan. 29, Thomson Reuters data showed.

Turnover stood at 1.13 billion rupees ($8.5 million) in early trade on Thursday.

The index had gained 6.4 percent in nearly a month through Thursday as investors picked up risky assets on expectations of strong corporate earnings and political stability after the elections, which political analysts see the current ruling party as having an edge over the opposition coalition.  ($1 = 133.7500 Sri Lankan rupees)

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