A key indicator to watch is whether the government would increase
petroleum prices after the end of the present local government elections
due to rising oil prices in the international market.
Such an increase would cause supply side inflationary pressure on the economy.
The state owned Ceylon Petroleum Corporation is allegedly losing between
Rs. 20-25 on a litre of refined petroleum oil at current prices (see
also the business editorial). Meanwhile trading in the secondary bond
market was sluggish, with the market awaiting the month end inflationary
data before making their next move.
One source expected inflation to move up in this month and the next due
to lower base figures in the corresponding periods last year, however
another source said that food prices appeared to be stabilizing, a key
driver of inflation these days in the aftermath of the recent floods
which disrupted the flow of vegetables to the market, thereby causing
supply side inflationary pressure on the economy.
Forex
The exchange rate which appreciated to the Rs. 109/90 levels against
the greenback went down to the Rs. 110/15/25 levels in two way quotes in
inter-bank trading at Monday’s close due to importer pressure, with the
decline continuing in to the following day Tuesday as well, where the
exchange rate was being quoted at the Rs. 110/40/50 levels in two way
quotes.
However on Wednesday it went up to the Rs. 110/20/25 levels, before
falling to the Rs. 110/25/35 levels the following day Thursday on the
back of sluggish trading.
“Large volumes were traded in the market on Tuesday and Wednesday, some
Rs. 120 million and Rs. 110 million respectively, whereas on Thursday it
slipped to under Rs. 30 million probably due to the elections,” the
source said.
Central Bank of Sri Lanka has made it clear to the market that it wants
the exchange rate to operate within the Rs.109/90-110/50 band or face
the risk of market intervention, he said. On Friday the exchange rate in
two way quotes was being traded in the Rs. 110/30/40 levels on the back
of increased activity.
Sourse: http://www.thesundayleader.lk/2011/03/20/epf-intervenes-but-forced-selling-bigger-threat/
Posted on Tuesday, March 22, 2011 @ 02:36:21 LKT
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