Sri Lanka's rupee rose sharply on Friday after the central bank slashed commercial banks' net dollar opening positions, forcing them to sell greenbacks and boost dollar liquidity in the market.
The rupee firmed to 119.20/120.00 to a dollar at 0507 GMT, up 2.1 percent from Thursday's close of 122.25/40, and snapped a week-long weakening trend.
The central bank cut commercial banks' net dollar opening positions to a third to square off banks' deficit and surplus, A.A.M. Thasim, additional director at the central bank's international operations department, told Reuters.
Three currency dealers said the move put more than $30 million additional dollars into the market.
The central bank, after spending more than $2.7 billion in foreign exchange reserves in the second half of 2011 to fend off depreciation, last month changed its policy of protecting a specific exchange rate.
But it has intervened once already, pulled a handful of regulatory levers and engaged in moral suasion to keep the rupee from falling further.
The central bank wants to ensure foreign investors do not cash in the more than $2 billion they have placed in rupee-denominated securities, which with relatively high yields were a top choice of investors who wanted exposure to Sri Lanka's post-war upside potential.
A Reuters monthly forex poll on Wednesday forecast the rupee to fall as far as 128.50 by the end of August.
The rupee firmed to 119.20/120.00 to a dollar at 0507 GMT, up 2.1 percent from Thursday's close of 122.25/40, and snapped a week-long weakening trend.
The central bank cut commercial banks' net dollar opening positions to a third to square off banks' deficit and surplus, A.A.M. Thasim, additional director at the central bank's international operations department, told Reuters.
Three currency dealers said the move put more than $30 million additional dollars into the market.
The central bank, after spending more than $2.7 billion in foreign exchange reserves in the second half of 2011 to fend off depreciation, last month changed its policy of protecting a specific exchange rate.
But it has intervened once already, pulled a handful of regulatory levers and engaged in moral suasion to keep the rupee from falling further.
The central bank wants to ensure foreign investors do not cash in the more than $2 billion they have placed in rupee-denominated securities, which with relatively high yields were a top choice of investors who wanted exposure to Sri Lanka's post-war upside potential.
A Reuters monthly forex poll on Wednesday forecast the rupee to fall as far as 128.50 by the end of August.
