‘Spot’ strengthens on IMF talks

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The benchmark, albeit administered market ‘spot’ strengthened by a rupee to be trading at Rs 360/364 to the US dollar in two way quotes yesterday, market sources informed ‘Finance Today.’

They said that the strengthening of the rupee was after a 10 day lapse led by the positive outcome that the IMF had in their discussions with the Government of Sri Lanka (GoSL), which ‘face to face’ talks concluded yesterday. In the interim to Wednesday (29 June), the ‘spot’ was trading unchanged at Rs 360/365 to the dollar in two way quotes.

However, 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 Wednesday, they said.

Prior to 20 June, 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,  made worse by an inflexible ‘spot’ in operation, it  closed unchanged for the thirtieth consecutive market day at Rs 199.75/200.25 to the dollar in two way quotes on 30 June 2021.

  Meanwhile, yesterday, the administered market ‘spot’ was down by between 80.23-81.77 per cent (Rs 160.25-163.75) 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 359.88 to the dollar yesterday.

They further said that trades in the administered market ‘spot’ (Rs 360/364) 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 78.92 per cent (Rs 158.74).

 Yesterday, the value of this official administered ‘spot’ was fixed at Rs 359.88 to the dollar, while a year ago it was Rs 201.14. 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 thirtieth 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