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http://www.brecorder.com/2015/03/06/230506/

Questions: Why has the Sri Lankan central bank been intervening in the currency market? What has happened to the central bank's foreign reserves? From this, can you tell whether the central bank has been buying its own currency or selling its own currency?

Article:

Sri Lankan rupee ends steady; central bank says cuts FX intervention

COLOMBO: The Sri Lankan rupee closed unchanged on Friday on sustained moral suasion by the central bank amid calls by the International Monetary Fund to limit its intervention in the foreign exchange market. Central Bank Governor Arjuna Mahendran however said on Thursday the monetary authority was not intervening as aggressively in the forex market as earlier. "In my view, we are not intervening aggressively. In fact, reserves are rising," Mahendran told Reuters on the sidelines of a forum in Colombo. He said Sri Lanka's foreign reserves have increased to over $7 billion, from $6.3 billion in January. The markets were closed on Thursday for a holiday. Actively traded one-week forwards ended steady at 133.60/75 per dollar on Friday. "No trades can be done above 133.60 on one-week (forwards) despite the importer (dollar) demand and nobody is selling dollars. The pressure is there, but nothing is happening," said a currency dealer, adding the currency was still under stress. Central bank officials were not available for comment. The IMF urged Sri Lanka to limit intervention in the forex markets, which the country's central bank was doing to deal with excessive short-term volatility in the currency. IMF officials also stressed on the need for a foreign exchange reserves cushion during a series of meetings with top officials dealing with the country's economic policy. Mahendran said on Tuesday central bank intervention was necessary to maintain the rupee's stability since the currency was thinly traded. The spot currency was steady at 132.90/133.20 for a ninth straight session, well within the limits set by the central bank. Copyright Reuters, 2015