CBSL’s absorbs Rs 18.3B to keep inflation at bay

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By 2018-01-03

Paneetha Ameresekere

The benchmark 'spot' virtually held on to last year's close, finishing yesterday, the opening day of the year at Rs 153.60/65 to the US dollar in two way quotes on thin trades, market sources told this reporter.

On the previous market day, Friday, 29 December, 2017, it had closed at Rs 153.55/68 to the dollar in two way quotes. 'Similar to last year, we expect the 'spot' to weaken by three per cent due to the island's traditional import bent,' they said.Last year, the exchange rate weakened by 2.85 per cent, the sources said.

'We expect next month's Local Government elections too to have an impact on the rupee, albeit marginally", sources said.

Meanwhile, a year ago on Monday, 2 January, 2017, the market exchange rate (MER) then, namely the 'spot next' weakened sharply by 30 cents to Rs 150.05 to the dollar, this newspaper's archives showed. The 'spot' at that time was bridled at Rs 150 to the dollar to minimize Government of Sri Lanka's rupee debt.

Year on year as at yesterday, the MER has weakened by between 2.37-2.40 per cent (Rs 3.55-3.60), thereby giving a pull to cost push inflation. Nonetheless, to mitigate demand pull inflation and to ensure that call money rates don't slacken, Central Bank of Sri Lanka on a net basis absorbed Rs 18,303.50 million worth of excess liquidity from the market through its open market operations yesterday, due to net excess liquidity (NEL) increasing by 133.54 per cent to Rs 22,712 million.

This assured that the weighted average rate of call money increased by one basis point to 8.16 per cent, yesterday, without falling.

The high tax regimen continued to rub on the stock market, with the Bourse making a parsimonious turnover of Rs 194.56 million at the opening day of trading for the year, yesterday, compared to a figure of Rs 329.20 million a year ago on 2 January, 2017.

However, the benchmark ASPI made a pyrrhic gain of 0.66 per cent to 6,411.27 points over its previous day's close and the more sensitive S&P SL 20 Index by 0.84 per cent to 3,702.63 points, yesterday. However, the year opened with the market enjoying a net foreign inflow (NFI) of Rs 102.81 million, led by blue chip JKH (Rs 70.76 million) at yesterday's trading. The Bourse last year enjoyed an NFI of Rs 19.21 billion.

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