Colombo: Starting today, Sri Lanka will stop a pre-announced guidance peg for the foreign exchange market. Sri Lanka had operated a guidance peg, fixed exchange rate, of around 360 to the US dollar with complementary monetary policy up to the last week of February.
The central bank’s purchases of dollars outpaced its sales in the last quarter due to the tight monetary stance.
Earlier last week, guidance peg was pushed up from around 360 to 340 to the US dollar. The Lankan rupee had appreciated accordingly to a high of 334 against a dollar.
Governor of Central Bank of Sri Lanka Dr. Nandalal Werrasinghe expressed hope that market will stabilise with sufficient liquidity and depth in the foreign exchange market from today.
He added that whenever there is an opportunity, the central bank will buy Forex to build up the buffers. He said that the bank will operate ad-hoc pegs which fall under flexible exchange rate system where the bank would stabilise volatile movement by intervention.
A currency peg is a policy in which a national government or central bank sets a fixed exchange rate for its currency with a foreign currency.
