ECONOMYNEXT – Sri Lanka’s rupee opened at 313/323 to the US dollar in the spot market Wednesday, up from yesterday’s close of 320/330 rupees, dealers said.
Business was done at 320 and 218.75 levels in early trade and the rupee was quoted at 313.00/319 to the dollar after the first hour of trading.
Sri Lanka’s rupee is appreciating amid negative private credit after a surrender rule that kept the rupee down was lifted.
There is selling pressure from remittance houses in particular, dealers said.
The central bank had been buying dollars in the market slowing the rupee’s appreciation.
On March 07, about 121 million dollars in spot, 33 in tom, 08 in cash and 46.5 million in forward trades have taken place in the interbank foreign exchange market.
After rates are hiked, private credit slowed, and the budget deficit is also reduced, under an International Monetary Fund program, a net international reserve target is what keeps the rupee from appreciating back up to previous levels.
Sri Lanka’s IMF deal is expected to go to the Board on May 20.
Generally before the IMF’s first tranche is given, countries with forex troubles have to hike rates to reduce domestic credit and money printing and also float the currency to end sterilized forex sales.
Under an IMF reserve target, purchases have to be sterilized or the liquidity mopped up. (Colombo/Mar08/2023)