ECONOMYNEXT – Sri Lanka’s rupee closed at 201/202 levels in the one-month dollar on Wednesday though spot market trading was not active, dealers said.
Sri Lanka’s rupee closed around 204/207 in the one-month forward market on Tuesday.
The Central Bank was quoting Telegraph Transfers (TT) rates of the dollar stood at 195.1/200.9 rupees.
Sri Lanka’s forex markets opened with muted activity with the spot dollar quoted at 192 with no offers, with the forward market also not active in early trade Wednesday dealers said.
In later trade the rupee was quoted around 198/205 levels, market participants said.
Amid unprecedented money printing dollar yields in Sri Lanka interbank market have exceeded the rupee yield, giving negative forward premiums, implying that the spot rate should be higher than the forward rate.
Sri Lanka’s commercial banks were quoting around 195 to 200 to the US dollar to buy and 203 to 208 to sell dollar to customers to retail to their customers. Some were quoting a little above 204 for larger import clients.
Sri Lanka’s forex markets had been volatile after interventions on Friday and Monday, which pushed down the spot rate to around 190 levels at one time.
Given the uncertainty, the spread between buying and selling rates has widened.
There have been calls to reform the central bank to restrain its liquidity injections which create forex shortages and balance of payments deficits.
Sri Lanka has a corrupted inflation targeting, output gap targeting not in line with monetary law: Wijewardene
Critics have warned that policy had worsened in recent years with ‘flexible inflation targeting’ described as a ‘corrupted’ inflation targeting framework which triggered severe monetary instability from 2015 to 2019.
In the secondary market, bond yields remained unchanged, dealers said.
Bonds maturing on 15.12.2022 closed at 5.95/05 per cent on Wednesday, down from 5.97/6.03 per cent on Tuesday.
Bonds maturing on 15.11.2023 closed at 6.50/60 per cent on Wednesday, wider from 6.50/55 per cent on Tuesday.
Bonds maturing on 15.12.2024 closed at 6.80/90 per cent, up from 6.75/90 per cent on Tuesday.
A bond maturing on 01.05.2025 closed at 6.90/20 per cent on Wednesday, down from 6.95/15 per cent on Tuesday.
A bond maturing on 01.02.2026 closed at 7.40/55 per cent on Wednesday, up from 7.25/40 per cent on Tuesday.
A bond maturing on 15.08.2027 closed at 7.75/90 per cent on Wednesday, up from 7.60/85 per cent on Tuesday.
Long tenor maturities were not quoted.