‘Spot’ Unchanged for 8th Day

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The benchmark, albeit administered market ‘spot’ closed yesterday (12) to be trading unchanged for the eighth consecutive market day at Rs 360/364 to the US dollar in two-way quotes, market sources told Ceylon Today.

However, from 21 June 2022 to last Wednesday (29 June), the ‘spot’ was trading weaker at Rs 360/365 to the dollar in two-way quotes, before strengthening by a rupee to be quoted at Rs 360/364 to the dollar in two-way quotes on the following day, that is, last Thursday (30 June).

They said the strengthening of the rupee after a 10 day lapse last Thursday was 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 last Thursday.

Meanwhile, on 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 21 June and remaining that way up to last Wednesday (29 June), sources 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, during this period last year, where then too the administered, made worse by an inflexible ‘spot’ in operation, closed unchanged for the fifth consecutive market day to 12 July 2021 at Rs 202/203 to the dollar in
two-way quotes.

Meanwhile, by yesterday, the administered market ‘spot’ was down by between 78.22-79.31 per cent (Rs 158-161) Year-on-Year (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 GoSL, CBSL and/or between the GoSL and/or CBSL with the market, which was fixed at Rs 360.90 to the dollar yesterday.

They further said 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 like 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 80.53 per cent (Rs 160.99).

Yesterday, the value of this official administered ‘spot’ was fixed at Rs 360.90 to the dollar, while a year ago it was Rs 199.91.

Meanwhile, YoY, the straitjacketed, inflexible administered market ‘spot’ a year ago was fixed at Rs 202/203 to the dollar in two-way quotes for the fifth consecutive market day to 12 July 2021. ‘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