Intervention Still Possible in Sri Lanka's Rupee: Central Bank

Xinhua | China Daily

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Sri Lanka's Central Bank may return to intervening in the exchange rate if inflows fluctuate significantly, a top official said here on Tuesday.

Central Bank Governor Ajith Nivaard Cabraal failed to rule out the possibility of intervention in the exchange rate during a press conference insisting that if necessary the monetary organization will intervene to control the rupee.

He accused "speculators" of driving down the exchange rate after Central Bank withdrew from intervention in early February and insisted that current rates of 129 against the dollar were far lower than the fundamentals of the market would allow.

"Different countries interpret "flexibility" in different ways. For us this means that it is necessary to enter the market if there are signs of a sudden appreciation or depreciation. Moreover since currency markets operate on thin volumes sometimes it is necessary for the Central Bank to limit speculation," he said.

Cabraal reiterated expectations of the rupee rising by at least 3 percent in the short term on increased inflows.

He remarked that investigations on currency speculators by the Central Bank were ongoing but refused to divulge any details.

The Central Bank minimized intervention in the rupee under International Monetary Fund pressure leading to a 16 percent depreciation from February. After warnings from the Finance Ministry and Central Bank last week the rupee has shown some stability.

© Xinhua