ECONOMYNEXT – Sri Lanka rupee continued to be under pressure without active trading at the 203 decreed non-credible peg market participants said with both the swap discounts continued to widen as dollar liquidity tightened, market participants said.
The spot /1month was quoted around -150/-80 cents up from -90/-50 on November 11.
Spot /3months was around -450/-400 from 350/300 cents.
Spot/ 6 months was -800/-700 cents.
The swap discount indicates that anyone swapping dollars for rupees at 203 will get it back at around 195, despite the rupee being under severe pressure.
In the kerb market dollars were quoted at 238.0/239.50 rupees from around 234.50 on November 11. Udiyal transfers are around 250 market sources said.
In the formal market, the US dollar is at 197/203 rupees indicative with some sporadic deals being made.
Sri Lanka is not printing money as much as earlier after price controls were lifted on bond auctions but cash is still injected at 6.0 percent overnight to sterilize interventions creating forex shortages.
Inflation for the 12-monthe ending November 2021 rose to 9.9 percent.
Last November the average weighted new deposit rate was 4.96 percent and the average weighted fixed deposit rate was 5.07 percent when large volumes of money was printed to keep rates at ‘historic’ lows.
At the economists warned that inflation would go up in addition to creating immediate forex shortages and reserve losses. (Colombo/Dec01/2021)