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FINANCIAL CHRONICLE™ » CORPORATE CHRONICLE™ » More inflows needed for rupee stability - Spot' strengthened to Rs 133.30 on thin trades

More inflows needed for rupee stability - Spot' strengthened to Rs 133.30 on thin trades

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Melissa Pereira


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

With Thursday's Rs 2.7 billion (US$ 20.5 million) net foreign inflows into the stock market due to foreign purchases in Ceylinco Insurance shares, the exchange rate continued to strengthen for the second day running on Friday, with the 'spot' being uplifted by 10 Sri Lanka cents (SLc) to Rs 133.30 to the US dollar and one month's forwards by 25 SLc to Rs 135.25, market sources told Ceylon FT. However, trading volumes like on Thursday were thin, they said.
In the two days to Friday, one month's forwards have strengthened by 40 Slc to Rs 135.25, with Central Bank's (CB's) new moral suasion diktat on one month's forwards functional at Rs 135.25 and that of the spot at Rs 133.30.

However, the odyssey of the "spot" last week was tragi-comic. CB, after first weakening the "spot" by 20 SLc to Rs 133.50 on Tuesday (12 May), strengthened it by 10 SLc to Rs 133.40 the following day Wednesday, probably being aware of Thursday's inflows in to the stock market.
But whilst not touching the "spot" on Thursday, nevertheless, it strengthened it by a further 10 SLc to Rs 133.30 by the weekend (Friday, 15 May).


However, sources said that for such administered strengthening of the rupee to be sustainable, there has to be continuous inflows. Thursday's foreign purchase of Ceylinco Insurance shares may be a one off deal, they said. But, for the uplift of the foreign exchange market, there needs to be continuous inflows, preferably in the form of exports or foreign direct investments, though the latter may take time to fructify due to the physical logistics involved, they said.
Conversions are made, based on Thursday's spot price of Rs 133.40. Transactions in the bourse are made, based on spot prices.

Courtesy: Ceylon Financial Times 17 May 2015

VALUEPICK

VALUEPICK
Expert
Expert

In addition to money inflow and outflow, there is part for Central Bank (Reserve Bank) to mange currency and interest rate according to the situation. It is hard to make 100% correct decisions in currency movements due to present global financial system and due to so many financial players in the global financial market. We should see more inflow and foreign remittances.  Remittances have remained stable. In February 2015, workers’ remittances increased by 1.9 per cent to US dollars 511.6 million from US dollars 502.0 million in February 2014.

Teller

Teller
Moderator
Moderator

How ever central bank has to put interest rate up to make rupee strong. I know personally most of sri lankan who works out of the country are not sending funds to sri lanka at the moment due to less interest. The highest inflow to the country is foreign employment earnings at the moment. I got 5,000 rupees gain when send currencies to LK compare to last month as rupee depreciation. Most guys believe keep salaries on hand and send them back to LK later is more advantages as rupee weak widens.

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