Rupee in freefall as US $ gains

The United States dollar reached another milestone yesterday (29), with the greenback rising to Rs 162.50, in the average selling price for telegraphic transfer by commercial banks, gaining nine cents over its 28 August close. The dollar has been having a record breaking run for the past consecutive 14 days, aided by a strong dollar globally and political uncertainty locally.

In the 14 days to yesterday, the greenback has gained by Rs 1.32 (0.82 per cent) thereby causing inflationary and cost of living pressure, as Sri Lanka is an import dependent economy. Islandwide inflation which hit a nadir of 1.6 per cent in April has since more than doubled to 3.4 per cent by last month, according to the latest official data. Year on year the dollar has gained by Rs 7.73 (4.99 per cent). The current depreciative pressure on the Rupee is led by foreign funds exiting from the Treasury Bond market and exporters postponing their decision to convert their dollars into Rupees on expectations that they will be able to get a better price at a future date.