May 11, 2018 / 10:52 AM / 2 months ago

Sri Lanka rupee to depreciate gradually - cenbank chief

COLOMBO, May 11 (Reuters) - The Sri Lankan rupee will depreciate gradually as dollar outflows surpass inflows, central bank chief Indrajit Coomarswamy said on Friday.

“Basically in Sri Lanka, (dollar) receipts are less than outflows. From now onwards it (rupee) will depreciate, but it would depreciate in a gradual way like it happened last year,” he told reporters in Colombo.

His comments come as the rupee hovers around record lows due to lack of exporter dollar conversions and political uncertainty after President Maithripala Sirisena suspended the parliament on April 12.

The currency hit a record low close on Thursday.

“Political uncertainty would have encouraged people (exporters) to hold money (dollars) outside the country for a little longer,” he said during the post-monetary policy rate decision media briefing.

“Depreciation is normal. But depreciating 1-2 percent a day is not rational. That’s more than warranted. We are saying it moved more than warranted.”

He said the central bank is “studying carefully” if there was extra pressure on the currency than was expected and also the behavior of exchange rate market participants.

The country’s monetary authority would take action if it found any signs of manipulation, he cautioned.

“We will make sure there won’t be any manipulation... we will be very stern if there is any manipulation.”

Last week, central bank’s senior deputy governor said the rupee would stabilise and the central bank will intervene to smoothen high volatility as there is no reason for a weaker currency.

The currency has declined 0.2 percent against the dollar so far this month after sliding 1.5 percent last month. It has fallen 2.9 percent so far this year, after having shed 2.5 percent in 2017. (Reporting by Ranga Sirilal Writing by Shihar Aneez; Editing by Sunil Nair)

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