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