‘Spot’ falls on GoSL demand
By Paneetha Ameresekere
The benchmark ‘spot’ sharply fell by a rupee amidst heavy volumes trading at Rs 194/195 to the US dollar as at 4 pm yesterday, market sources told Ceylon FT.
Generally, the ‘spot,’ has fallen in recent times due to the Government and/or its agents having to settle an import bill. The exchange rate (ER) market is currently controlled by the GoSL/Central Bank of Sri Lanka (CBSL) to prevent cost-push inflationary pressure as Sri Lanka is an import dependent economy.
‘Volumes yesterday were heavy due to exporter conversions led by their obligations to meet salary bills,’ they said.
In the calendar year to yesterday, the ER has weakened by Rs 6.50 (3.47 per cent and 3.45 per cent) in two way quotes and year on year by Rs 12.20-Rs 13.05 (6.72 per cent-7.19 per cent) in two way quotes. The ‘popular’ ER instrument of choice at last year end, which was one week’s forwards, due to almost similar but less harsher exchange controls, was trading at Rs 187.50/188.50 to the dollar in two way quotes as at 4pm, while a year ago the popular ER instrument was the ‘spot,’ due to even less harsher controls, was trading at Rs 181.80/95 to the dollar in two way quotes as at Thursday, 20 February, 2020.
The sustained spread of 100 cents between the ‘buy’ and ‘sell’ quotes in the ER market is an indication of uncertainty.
Meanwhile, GoSL’s Money Printing Borrowing Costs (MPBCs) decreased by 0.47 per cent (Rs 7.06 million) to Rs 15,168.55 million yesterday due to market preference to invest in riskless, low value Treasury (T) Bonds and T Bills in secondary market trading, rather than lend to the lucrative private sector, the engine of growth, due to sustained uncertainty.
Nonetheless, led by exporter conversions, net excess liquidity was uplift by 0.62 per cent (Rs 1.040 million/US$ 5.34 million) to Rs 169,664 million yesterday.