 to be trading at Rs 291.00/292.00 to the US dollar in two way quotes due to Central Bank of Sri Lanka’s (CBSL’s)){kind=link}
The benchmark ‘spot’ strengthened by 50 cents (0.17 per cent) to be trading at Rs 291.00/292.00 to the US dollar in two way quotes due to Central Bank of Sri Lanka’s (CBSL’s) absence from the market today, market sources who didn’t want to be named told ‘BMD.’
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 today, that helps to strengthen the rupee, due to a lack of dollar demand led by import controls and bans.
A weak ‘spot’ causes cost-push inflationary pressure as Sri Lanka is an import dependent economy, whereas a strong ‘spot’ negates cost-push inflationary pressure. Meanwhile, year on year (YoY) to today the ‘spot’ has steeply gained by between Rs 69.00 and Rs 73.00 (19.17-20 per cent) to the dollar in two way quotes. A year ago the ‘spot’ was trading unchanged for the sixteenth consecutive market day to 7 June 2022 at Rs 360/365 to the dollar in two way quotes, statistics also showed.
The overall strengthening of the rupee is after the Government of Sri Lanka (GoSL) and the 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.
Meanwhile, CBSL strengthened the administered ‘spot’ for the second consecutive market day to today, this time by 0.11 per cent (33 cents) to Rs 291.21 to the dollar. A a year ago CBSL kept the administered ‘spot’ unchanged at Rs 360.28 to the dollar. YoY to today, the administered ‘spot’ has sharply strengthened by 19.17 per cent (Rs 69.07) to the dollar.
‘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.