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Sri Lanka rupee opens firmer at 197.50/198.50 against one week dollar

ECONOMYNEXT – Sri Lanka’s rupee opened stronger at 197.50/198.50 to the one week US dollar on Friday after a forex surrender requirement was lifted and bond yields remained unchanged, dealers said.

The rupee last closed in the one-week forward market at 198.50/199.00 to the US dollar on Thursday.

Sri Lanka temporarily lifted a requirement to surrender 10 percent of remittances and 12.5 percent of exporter receipts to the central bank, reducing pressure on banks who were building up dollar positions to make payments, market participants said.

As banks sold down open dollar positions, liquidity improved yesterday.

A surrender requirement acts as a strong side convertibility undertaking which injects new liquidity to a pegged exchange rate arrangement.

However Sri Lanka’s rupee is now under pressure from existing excess liquidity injected through debt monetization (printed money) requiring dollars sales (weak side convertibility undertaking) to redeem the rupees.

In the secondary market bond yields remained unchanged on dull market trade, dealers said.

A bond maturing on 15.12.2022 was quoted at 5.80/90 per cent on Friday, down from 5.85/90 per cent on Thursday.

A bond maturing on 15.11.2023 was quoted flat at 6.25/35 per cent on Thursday.

A bond maturing on 01.12.2024 was quoted at 6.65/75 per cent on Friday, down from 6.68/78 per cent on Thursday.

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A bond maturing on 01.05.2025 was quoted at 6.85/95 per cent, up from 6.75/90 per cent.

A bond maturing on 15.02.2026 was quoted at 7.05/10 per cent, flat from 7.05/10 per cent.

A bond maturing on 15.08.2027 was quoted at 7.45/55 per cent, unchanged from 7.45/55 per cent on the previous day.

A bond maturing on 01.05.2029 was quoted at 8.00/30 per cent, down from 8.10/30 per cent

A bond maturing on 15.05.2030 was quoted at 8.10/15 per cent, from 8.00/30 per cent. (Colombo/March19/2021)

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