By Paneetha Ameresekere
Ceylon Finance Today:
Rs 576 million worth of foreign exchange dissipated from the markets last week (week ended Friday) due to foreigners exiting from the same, data showed.
Those included another Rs 367 million (US$ 2.79 million) exited from the government securities market in the week ended Wednesday (17), taking the value of such exits in the 16 weeks to Wednesday to Rs 47,268.74 million (US$ 359 million), thereby causing pressure on the exchange rate (ER).
This follows a Rs 209.1 million (US$ 1.6 million) net foreign outflow from the Colombo bourse in the week ended Friday.
Such exits are caused due to the recovery of the US economy, with additional depreciating pressure on the rupee being made due to import demand, complemented by a low interest rate regime which .makes the availability of cheap rupees to the market, to buy US dollars.
Sri Lanka is an import dependent economy, exemplified by the fact that, it runs a trade deficit, which increased by 4.3% on a year-on- year basis to US$ 6.8 billion in the first 10 months of the current year, hence, depreciating pressure on the rupee.
Therefore, currently, the ER in interbank "spot next next" trading is not being allowed to go above the Rs 132 level by Central Bank of Sri Lanka (CBSL) by a process of moral suasion and CBSL selling dollars to the market at the administratively low, discounted spot rate, which current figure is Rs 131.55/65 to the dollar in two way quotes, from its foreign exchange (FX) reserves.
Nevertheless, market sources told "Ceylon FT" that it would be but a matter of time before CBSL lets go of the rupee and interest rates, to prevent further depletion of CBSL's FX reserves, in a process of making it more expensive for the market to buy dollars by making rupees dearer by raising rates and allowing the ER to find its "price discovery," by permitting "demand" to determine the price of the ER, similar to what happened in 2011/12, when the rupee depreciated by Rs 17 then, in a short space of 13 months.
www.ceylontoday.lk
Ceylon Finance Today:
Rs 576 million worth of foreign exchange dissipated from the markets last week (week ended Friday) due to foreigners exiting from the same, data showed.
Those included another Rs 367 million (US$ 2.79 million) exited from the government securities market in the week ended Wednesday (17), taking the value of such exits in the 16 weeks to Wednesday to Rs 47,268.74 million (US$ 359 million), thereby causing pressure on the exchange rate (ER).
This follows a Rs 209.1 million (US$ 1.6 million) net foreign outflow from the Colombo bourse in the week ended Friday.
Such exits are caused due to the recovery of the US economy, with additional depreciating pressure on the rupee being made due to import demand, complemented by a low interest rate regime which .makes the availability of cheap rupees to the market, to buy US dollars.
Sri Lanka is an import dependent economy, exemplified by the fact that, it runs a trade deficit, which increased by 4.3% on a year-on- year basis to US$ 6.8 billion in the first 10 months of the current year, hence, depreciating pressure on the rupee.
Therefore, currently, the ER in interbank "spot next next" trading is not being allowed to go above the Rs 132 level by Central Bank of Sri Lanka (CBSL) by a process of moral suasion and CBSL selling dollars to the market at the administratively low, discounted spot rate, which current figure is Rs 131.55/65 to the dollar in two way quotes, from its foreign exchange (FX) reserves.
Nevertheless, market sources told "Ceylon FT" that it would be but a matter of time before CBSL lets go of the rupee and interest rates, to prevent further depletion of CBSL's FX reserves, in a process of making it more expensive for the market to buy dollars by making rupees dearer by raising rates and allowing the ER to find its "price discovery," by permitting "demand" to determine the price of the ER, similar to what happened in 2011/12, when the rupee depreciated by Rs 17 then, in a short space of 13 months.
www.ceylontoday.lk
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