The Central Bank will maintain flexibility in the rupee exchange rate despite the currency's weakening trend this month that was mainly due to dollar demand by importers, said Central Bank Deputy Governor Nandalal Weerasinghe .
"We are allowing it," he said, referring to the falling rupee. "We will maintain the flexibility. When we allow the flexibility, the market will take care of demand and supply," Deputy Governor said in an interview with Reuters.
Weerasinghe said the net outflow from foreign bond sales totalled only $12.5 million over the past two weeks, whereas dollar demand from importers has been much more than that on a daily basis. "So it is wrong to say the depreciation is due to foreigners selling bonds," he said.
The central bank on Wednesday cut the statutory reserve ratio (SRR) for commercial banks by 2 percentage points in a bid to boost economic growth.
"We will maintain stable rates in T-bills and T-bonds in the short term by absorbing more than what we want. That is the strategy," he said. "Only thing we want to see is commercial banks' lending rates on domestic loans coming down."