The benchmark, albeit administered market ‘spot’ closed unchanged for the 38th consecutive market day at Rs 360/364 to the US dollar in two way quotes to yesterday (25), market sources told ‘Finance Today’.
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, they said.
Yesterday, the value of this official administered ‘spot’ was fixed at Rs 361 to the dollar, while a year ago it was fixed at Rs 199.90. Meanwhile, the straitjacketed, inflexible administered market ‘spot’ a year ago was fixed at Rs 202/203 to the dollar in two way quotes, unchanged for the thirty third consecutive market day to 25 August 2021.
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 361 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 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 had depreciated by 80.59 per cent (Rs 161.10).
From 21 June 2022 to 29 June 2022, 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, ie on 30 June 2022.
They said that the strengthening of the rupee after a 10 day lapse on 30 June 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 on that day.
Meanwhile, on 20 June 2022, the administered market ‘spot’ strengthened by one rupee 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 29 June, sources said.
Prior to 20 June 2022, 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.
By Paneetha Ameresekere