Sri Lankan rupee parallel markets diverge and bonds stagnate

ECONOMYNEXT – The Sri Lankan Rupee was largely inactive in the forex market with the official selling rate for importers around 203 and the parallel market diverged slightly with the market falling from previous highs, market participants said .

In the interbank market, direct trades are rare and there are usually offers at 199.90 without offers, although the swap market is active, the dealers said.

The sidewalk market fell from 230 earlier levels to around 225 or slightly lower, although mondyal has diverged and is still hovering above 230, market participants said.

Authorities have questioned some licensed money changers about who is buying dollars, after a sudden demand for dollar notes has emerged in recent weeks with the emergence of unlicensed middlemen.

Term premiums also eased after a state bank stayed away from long-term dealers. Sri Lanka’s private credit picked up in the first five months of the year, pushing up imports.

Banks ration dollars to importers, as money printing has triggered currency shortages and trade restrictions have prohibited interbank sales above 200 and 203 to import end customers.

Sri Lanka’s interbank foreign exchange markets are not allowed to trade above 200 per US dollar and importing customers are not allowed to receive dollars above 203 per US dollar within the restrictions announced after the money printing triggered currency shortages.

The central bank’s indicative spot rate was 199.9000 on July 13, down from 199.9056 on July 12.

The wire transfer buy rate was 198.3183 and the sell rate was 202.8977 on Tuesday morning.

In bond markets, Gilts yields are stable in a lackluster market, brokers said.

A 2-year bond maturing on 12/15/2022 was listed at 5.60 / 70% on Tuesday from Monday.

A bond maturing on January 15, 2023 has been listed at 5.70 / 85% since the close on Monday.

A bond maturing on September 15, 2024 was quoted unchanged at 6.60 / 70 percent.

A bond maturing 02/01/2026 has been listed at 7.30 / 45 percent, stable since the last close.

A bond maturing on 08/15/2027 has been listed unchanged at 7.55 / 80 percent since the last close.

A 10-year bond maturing on 05/15/2030 has been listed at 8.25 / 50% since Friday. (Colombo / July 13/2021)

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