ECONOMYNEXT – Sri Lanka’s rupee opened at 311.00/311.50 to the US dollar in the spot forex market Friday dealers said, stronger from Thursday’s close of 313.25/50 to the dollar.
The rupee gained as much as 310.50 levels soon after opening.
Sri Lanka’s balance of payments is in surplus amid deflationary monetary policy, where the central bank is able to set the floor on the exchange rate.
There are also lag effects in forex receipts and payments.
When the rupee appreciates, importers also delay covering, but remittance dollars generally get converted, market participants said.
The practice can lead to to steep swings if the central bank does not set a floor rate (strong side convertibility).
Sri Lanka has a de facto pegged exchanged rate, which is seen by central bank bank collections of reserves, and exchange rate policy incompatible with reserve collecting can lead to swings.
At the moment however monetary policy is complementary to reserve collections, where liquidity from dollar purchases are mopped up.
There was also a surge in imports in December which reduces imports in January.
A bond maturing on 01.02.2026 was quoted at 12.20/40 from 12.20/35 percent on Thursday.
A bond maturing on 15.09.2027 was quoted 12.70/13.00 from 12.80/13.00 percent.
A bond maturing on 15.03.2028 was quoted at 13.00/20 percent from 13.10/15 percent.
A bond maturing on 15.07.2029 was quoted at 13.15/35 percent from yesterday’s 13.20/35 percent
A bond maturing on 15.05.2030 was quoted at 13.30/45 from 13.20/35 percent.
A bond maturing on 15.05.2031 was quoted indicatively at 13.40/55 from Thursday’s 13.40/55 percent. (Colombo/Feb03/2023)