‘Spot’ down Rs 171-180

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The benchmark market ‘spot’ sharply weakened by Rs 10 in two-way quotes to be trading at Rs 370/380 to the US dollar in two-way quotes in interbank foreign exchange (FX) trading on Monday (2 May) amid sustained uncertainty, made worse by Finance Minister Ali Sabry telling Parliament earlier on the same day Monday that the country’s liquid foreign reserves have fallen below US$ 50 million, market sources told Finance Today.

Year-on-Year (YoY) to Monday the ‘spot’ has weakened by between Rs 171-180 (85.93-90 per cent) in two-way quotes, having closed administratively ‘stronger’ at Rs 199/200 to the US dollar in two-way quotes on 4 May 2021, thereby causing cost-push inflationary pressure, as Sri Lanka is an import-dependent economy.

Meanwhile, since 28 April 2021 to 9 March 2022, a unique thing happened in the country’s interbank FX market, where for the first time after the liberalisation of the economy on 21 July 1977, the interbank FX market went virtually dead after Central Bank of Sri Lanka (CBSL) started fixing the ‘spot,’ void of hardly any CBSL intervention in the interbank FX market. However, the exchange rate was once more liberalised 11 months later on 10 March 2022.

Meanwhile, the administered ‘spot’ was fixed at Rs 199.69 to the dollar in two-way quotes by CBSL a year ago, compared to a weaker administered rate of Rs 340 to the dollar on Monday, down 70.26 per cent (Rs 140.31) YoY.

‘Spot’ trades are settled after two market days from the date of transaction. CBSL, the steward of GoSL debt and of its foreign reserves, deals in ‘spot.’ The banking regulator is also CBSL. The ‘spot’ is administered by CBSL to show GoSL’s foreign debt in rupee terms to be of a lower value for accounting purposes, it’s learnt.

By Paneetha Ameresekere