May 17 (Bloomberg) -- Sri Lanka’s rupee will appreciate significantly and the central bank is ready to intervene to prevent “unnecessary” movement in the currency, Governor Ajith Nivard Cabraal said.
“We expect the rupee to significantly appreciate from the current levels due to a very clear path that will be seen in our external account,” Cabraal said in an interview in Nepal yesterday. “If we believe that it is trading at levels not in line with fundamentals we stand ready to deal with any unnecessary movement.” He was attending a meeting of South Asian central bank officials.
The Central Bank of Sri Lanka held interest rates last week after implementing an economic policy overhaul this year to damp import demand, narrow the trade gap and protect foreign reserves. The rupee has rebounded 2.7 percent since falling to 133.10 per dollar on April 25, a record low.
The rupee gained 0.1 percent to 128.9 per dollar yesterday, while the Colombo All-Share Index of stocks rose 1.7 percent.
Borrowing costs are at appropriate levels and the nation doesn’t need to take further steps on interest rates, Cabraal said. The central bank’s reverse repurchase rate is 9.75 percent and the repurchase rate is 7.75 percent.
The central bank raised borrowing costs twice this year and moved to a more freely floating exchange rate in addition to increasing fuel prices to damp oil imports.
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