The benchmark, albeit administered market ‘spot’ remained unchanged to be trading at Rs 360/365 to the US dollar for the fourth consecutive market day to Friday (24 June), market sources told Finance Today.
However, four days ago to last Monday (20 June), the administered market ‘spot’ strengthened by Rs 1 after nearly 26 months to close at Rs 359/364 to the dollar in two-way quotes due to slack demand, before weakening to Rs 360/365 to the dollar in two-way quotes the following day, Tuesday (21 June), and remaining that way up to Thursday as well, they said.
Prior to last 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) to yesterday, where then too the administered, coupled with an inflexible ‘spot’ in operation, closed unchanged for the twenty sixth consecutive market day to Rs 199.75/200.25 to the dollar in two-way quotes on 23 June 2021. Thursday, 24 June 2021 was a Poya holiday for the market.
Meanwhile, on Friday, 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 360.30 to the dollar on Friday.
They further said trades in the administered market ‘spot’ (Rs 360/365) on Thursday 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 Friday has depreciated by 80.25 per cent
On Friday, the value of this official administered ‘spot’ was fixed at Rs 360.30 to the dollar, while a year ago it was Rs 199.89. Meanwhile, the straitjacketed, inflexible administered market ‘spot’ a year ago was fixed at Rs 199.75/200.25 to the dollar in two-way quotes, the twenty- sixth consecutive market day to Friday, 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