‘Foreign exchange market remains volatile despite helping hand from China’

by Sanath Nanayakkare

Sri Lanka’s foreign exchange market has been volatile even after China has generously extended its helping hand to Sri Lanka with a US$ 500 million loan recently, market participants said yesterday.

This US dollar infusion by China through a loan which pushed down the spot rate of the US dollar to around 190 levels as the markets opened this week. Later we saw the US dollar getting quoted around 198/205 levels despite the state banks selling around $ 65 million on 19 April, in addition to doing the same late last week,” they said.

However, Central Bank yesterday quoted USD/LKR spot buy rate at Rs.195.10 with sell rate at Rs.200.90.

According to Economy Next financial news website Sri Lanka rupee was quoted at 203/208 in the one month forward contracts yesterday though spot market trading had not been active. And in later trade the rupee was quoted around 198/205 levels, it said.

Given the uncertainty, the spread between the banks’ buying and selling rate of the US dollar has varied adding confusion to the market, they said.

Meanwhile following state banks and private commercial banks had announced their currency notes encasement and selling rate as follows.

Samagi Jana Balawegaya (SJB) MP Dr. Harsha de Silva said on April 20 that businesses were confused as commercial banks quoted different rates for the US dollar.De Silva told the parliament that despite State Minister of Money and Capital Markets and State Enterprise Reforms Ajith Nivard Cabraal tweeting on Monday that the rupee had appreciated, the market behaviour proved otherwise.”When the market opened on April 20, the rupee was 192, but by 3:21 p.m. HNB quoted Rs. 208, Commercial Bank quoted Rs. 206 and state-owned People’s Bank quoted Rs. 206.50. This goes into history of Sri Lanka as an era where rupee depreciated drastically,” Dr. de Silva said.

Meanwhile, Minister of Trade Bandula Gunawardena said in parliament on April 20 that the country is in a debt trap as the previous government’s two finance ministers raised money for financing government programmes, paying down old debt, paying interest on debt and other government spending needs in an irresponsible way.