The benchmark ‘spot’ gained by a record Rs 5.30-5.00 (1.75-1.65 per cent) in two way quotes when it hit more than a 14 month high at today’s inter-bank foreign exchange (FX) trading to be ‘going’ at Rs 297.00/297.50 to the US dollar in two way quotes, sources who didn’t want to be named told ‘BMD.’
Prior to today, the highest value the ‘spot’ fetched was on 22 March 2022 with a figure of Rs 275/285 to the dollar in two way quotes. Since then and up to the previous day Thursday the ‘spot’ has been trading at Rs 300 or more, records showed. The current strengthening of the rupee is after the Government of Sri Lanka (GoSL) and the Central Bank of Sri Lanka (CBSL) entered into an IMF Staff level agreement for the release of a USD three billion Extended Fund Facility (EFF) spread over a four year period, with the
first tranche of $ 330 million released in March itself.
This has aided the ‘spot’ to make consecutive gains for five market days to today. Subsequently, year on year (YoY) to today the ‘spot’ has steeply gained by between Rs 63-67.50 (17.50-18.49 per cent) to the dollar in two way quotes, thereby squashing demand-pull inflationary pressure as Sri Lanka is an import dependent economy.
A year ago the ‘spot’ was trading unchanged for the eighth consecutive market day to 26 May 2022 at Rs 360/365 to the dollar in two way quotes, statistics also showed. CBSL buys dollars from the market to strengthen the country’s parlous foreign reserves, but at the expense of weakening the rupee, but when there is a ‘pause,’ like what happened on Friday for instance, that helps to strengthen the rupee.
Meanwhile, CBSL strengthened the administered ‘spot for the fourth consecutive market day to today, this time by 0.07 per cent (seven cents) to Rs 303.05 to the dollar. A year ago CBSL weakened the administered ‘spot’ by 0.09 per cent (33 cents) to Rs 359.71 to the dollar, aiding in a steep YoY strengthening of the official ‘spot’ by 15.75 per cent (Rs 56.66) to the dollar by today.
‘Spot’ trades are settled after two market days from the date of trading. CBSL the steward of GoSL debt and of its foreign reserves deals in the official ‘spot.’ The official ‘spot’ is usually artificially propped up to minimize the cost of GoSL’s foreign debt in rupee terms and also to minimize GoSL’s foreign debt servicing costs in rupee terms.