COLOMBO, Aug 20 (Reuters) - Sri Lanka's central bank kept the rupee LKR= steady on Thursday by absorbing dollars to prevent appreciation, after a U.S. fund put more than $875 million into long-tenure treasury bonds this week.
The rupee closed flat at 114.77/82 a dollar, for a fourth straight day.
The central bank said on Thursday said the largest post-war investment — the $875 million purchase of four- and six-year treasury bonds — helped boost foreign exchange reserves by more than a third to over $3 billion. [ID:nCOL428771]
Currency traders said the influx put upward pressure on the rupee, but the central bank said it would absorb all inflows via government securities to keep it from rising from its present rate of 114.80 and hurting exporters. [ID:nCOL515170]
On Monday, the rupee appreciated for the first time in three months after a state bank, through which the central bank directs the market, did not intervene despite large purchases of the island nation’s government securities.
“We believe that the T-bill yield could be brought down to a single digit of around 9 percent by end of the year,” G.L. Peiris, Minister of Export Development and International Trade told reporters at Parliament.
Dealers on Wednesday said the large inflow was from a hedge fund and the state bank continued buying dollars as the upward pressure on the rupee remained.
The all-share index .CSE closed 0.06 percent or 1.58 points firmer at 2,524.62. It hit 14-month high close on Tuesday.
“Not much of foreign activity was seen in the market,” Nikita Tissera, research manager at SC Securities in Colombo.
Analysts said foreigners were encouraged to invest in bonds and bills that could give them a return of 10.5-13 percent, compared to the an average share yield of 4-5 percent amid poor earnings in the June quarter.
The cumulative June quarter earnings have declined by 69 percent as of Wednesday, a quarterly results update released by John Keells Stockbrokers showed.
Top fixed-line operator Sri Lanka Telecom SLTL.CM closed 0.5 percent firmer at 42.75 rupees, calculated on a weighted average, while shares in conglomerate John Keells Holdings JKH.CM closed 0.5 percent up at 134.25 rupees.
The bourse is up 67.9 percent so far this year and is one of Asia’s best-performing markets. It has surged 32.3 percent since the government declared victory in the war on May 18.
Turnover was 333.62 million Sri Lankan rupees ($2.91 million), less than last year’s daily average of 464 million.
Sri Lanka’s parliament on Thursday amended the island nation’s securities law to allow trading in derivatives, options, and futures. [ID:nCOL487671]
The interbank lending rate or call money rate CLIBOR fell to 9.591 percent from Wednesday’s 9.801 percent.
For secondary market rates, please see <0#LKBMK=>. ($1=114.80 Sri Lankan Rupee) (Editing by Bryson Hull)