Newly administered ‘Spot’ unchanged for 17th day

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The guided benchmark market ‘spot’ administered since 13 May closed unchanged at Rs 360/365 to the US dollar in two-way quotes for the seventeenth consecutive market day to  yesterday (9), nonetheless down by between 80.23  and 82.27 per cent (Rs 160.25 and 164.75) year-on-year (YoY), thereby causing cost push inflationary pressure as Sri Lanka is an import dependent economy, market sources told Finance Today.

The band in which the ‘guided market spot’ may operate is +/- three per cent of the administered ‘spot’ value for transactions involving the Government of Sri Lanka (GoSL), Central Bank of Sri Lanka (CBSL) and or between the GoSL and/or CBSL with the market, which was Rs 360.03 to the US dollar yesterday.

They further said that trades in the administered market ‘spot’ (Rs 360/365) were mainly restricted to ‘bank-client’ outright trades, while the interbank foreign exchange (FX) market was however, dominated by swaps, which were outside the domain of the FX market for this purpose.

YoY as at yesterday, this administered market ‘spot’ has weakened by between 80.23 and 82.27 per cent (Rs 160.25 and 164.75), thereby causing cost push inflationary pressure.

In related developments, the administered ‘spot’ for official purposes, such as for trades involving CBSL, GoSL and/or CBSL, GoSL and the market, YoY to yesterday depreciated by 80.17 per cent (Rs 160.20).  Yesterday, the value of this official administered ‘spot’ was fixed at Rs 360.03 to the dollar, while a year ago it was Rs 199.83. Meanwhile, the straitjacketed, inflexible administered market ‘spot’ a year ago was Rs 199.75/200.25 to the dollar in two way quotes, the sixteenth consecutive market day, to 9 June 2021, that it has remained unchanged at these levels.

The official administered ‘spot’ is currently used for transactions involving only among the GoSL, CBSL and the country’s foreign reserves. It’s administered to show Sri Lanka’s foreign debt in rupee terms low, while in the case of the administered market ‘spot’, to show a lower cost of living and/or inflation. ‘Spot’ trades are settled after two market days from the date of transaction. CBSL, the steward of GoSL debt and its foreign reserves deals in ‘spot’.

By Paneetha Ameresekere