During the current balance of payments crisis the rupee fell from 110 to 130 to the US dollar.
Analysts have pointed out that if Treasury bill yields are allowed to adjust to credit demand conditions and public debt office does not manipulate Treasuries yields, the currency peg and inflation can be kept stable, giving a foundation for people to grow and emerge from poverty.
Corrected. Wednesday bond yield 13.30/50 levels On Thursday a 3-month Treasury bill which dropped on Wednesday's auction to 11.99 percent from 12.19 a week earlier traded as low as 11.
50 percent and closed around 11.
40/60 percent, dealers said.
A 2-year bond maturing on March 01, 2012 was quoted around 13.
15/30 Thursday, from around 13.30/50 levels a day earlier.
A 3-year bond maturing on July 2015, was quoted around 13.70/80 percent down from 13.75/14.00 percent levels, dealers said.
Sri Lanka's dollar peg came under pressure from the second quarter of 2011 as the Central Bank printed money to keep interest rates low and bought Treasury bills. Credit growth picked up partly due to state manipulation of energy prices.
Sri Lanka got the powers to print money and intervene in Treasury bill markets after a money printing central bank was set up in 1950 leading to chronic depreciation of the peg, periodic severe balance of payments crisis, high inflation and general economic instability.