‘Spot’ weakens on petroleum imports

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Petroleum import payments weakened the benchmark, albeit administered market ‘spot’ by a rupee for it to be trading at Rs 360/365 to the US dollar, thereby reestablishing the status quo that previously prevailed from 13 May 2022 to Friday (17), market sources told Finance Today.

However on the previous day (Monday 20 June), the administered market ‘spot’ strengthen by Rs 1 after nearly 26 months to close at Rs 359/364 to the dollar in two way quotes due to slack demand, they said.

Prior to Monday, the last time the exchange rate (ER) made gains was on 28 April 2021, where it was artificially strengthened by Central Bank of Sri Lanka (CBSL) by between Rs 3-4 to be trading at Rs 199/200 to the dollar in two way quotes, where, however, trades were restricted to bank-client and not bank-bank, similar to the current state of affairs.

On 28 April 2021, the guided, market ER, like now, was the ‘spot’, while on the previous day 27 April, 2021, the market ER was one month’s forwards which closed at Rs 202/204 to the dollar in two way quotes.

In related developments, last year, year on year (YoY), where, then too, the administered, coupled with an inflexible ‘spot’ in operation,  closed unchanged for the twenty fourth consecutive market day to Rs 199.75/200.25 to the dollar in two way quotes on 21 June 2021.

  Meanwhile, yesterday, the administered market ‘spot’ was down by between 80.23-82.27 per cent (Rs 160.25-164.75) YoY, thereby causing cost push inflationary pressure as Sri Lanka is an import dependent economy; sources said.

The band in which the ‘guided market spot’ may currently operate is fixed at +/- three per cent of the officially administered ‘spot’ value, where the latter is applicable for transactions involving the Government of Sri Lanka (GoSL), CBSL and or between the GoSL and/or CBSL with the market, which was fixed at Rs 361.75 to the dollar yesterday.

They further said that trades in the administered market ‘spot’ (Rs 360/365) yesterday 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.

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 has depreciated by 80.99 per cent (Rs 161.88).

 Yesterday, the value of this official administered ‘spot’ was fixed at Rs 361.75 to the dollar, while a year ago it was Rs 199.87. Meanwhile, the straitjacketed, inflexible administered market ‘spot’ a year ago was fixed Rs 199.75/200.25 to the dollar in two way quotes, the twenty fourth consecutive market day to yesterday, where it has administratively remained unchanged at those levels, 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 also deals in ‘spot’.

By Paneetha Ameresekere