The Sri Lankan rupee opened weaker at 120.30/35 against the US dollar in the spot dollar market.
It drifted lower as the foreign exchange market continued to look for direction but stocks opened stronger, LBO reports.
olombo All Share Index rose 1.6 percent in the first half hour of trading.
In forex markets trades were done as low as 121 and the spot dollar was quoted as low as 121.00/121.20 rupees, dealers said.
A state name was later offering dollars at 120.20/30 dealers said but dealers believe it was not a central bank intervention.
Economic analyst say dollar inflows to the Treasury can be sold in the market with no negative effect to the exchange rate.
Dealers say importers are booking forward but there have not been significant exporter sales as yet.
Economists say it is usually for the currency to temporarily overshoot in a free float as the market searches for direction.
The rupee came under pressure from strong credit growth in 2011. However policy has since been tightened, and the authorities have also raised fuel prices.
With the depreciation of rupee value to 121, the rupee value of the country’s debt burned has risen by a whopping Rs.252 billion, the main opposition UNP charged today.
Speaking to the Daily Mirror, UNP MP Ravi Karunanayake said that the country’s actual debt volume stood at Rs.5,200 billion before the recent drop in rupee value, and it would rise by another Rs.252 billion.
Mr. Karunanayake said that 52 per cent of the total debts are external borrowings.
“The rupee component of the long term liabilities has increased in this manner. In addition to the increase of Rs.252 billion, there will be a further addition of Rs.27 billion to the debt component in terms of interest payment. That is the gloomy picture of the economy,” he said.
The Central Bank recently stopped intervening in the control of exchange rates, and as a result the rupee value dropped to 121 against the US dollar.
Earlier, he said that the debt burden rose by Rs.81 billion after the devaluation of the rupee by three per cent in the budget.
Meanwhile, Minister of National Languages and Social Integration Vasudeva Nanayakkara called the Central Bank’s decision in this regard a blunder. Mr. Nanayakkara said that the import cost would rise by leaps and bounds under the present circumstances, and he feared whether the economy could cope up with the challenges triggered by this decision.
“This is a blunder. Exporters’ revenue will increase in rupee terms because of this decision. The tea and rubber industries will benefit. Yet, we have to pay increased rates for imports of essential items. Their prices will go through the roof. The rupee component of the debt burden will rise. Therefore, this decision’s beneficial effect on export industries will be negated by such impacts on imports,” he said.
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