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The exchange rate (ER) remained unchanged at
Rs 133.60 to the US Dollar in interbank spot trading yesterday, with market transactions dominating trading and Central Bank (CB) intervention virtually taking a backseat, market sources told Ceylon FT.
Volumes were moderate, they said. Meanwhile, CB's foreign reserves were uplifted by US$ 673.3 million to
$ 7,519.07 million by last month end (over that of end May figures), not due to inflows, but due to CB's $ 1.5 billion swap arrangement with the Reserve Bank of India, where the first instalment of $ 400 million was disbursed in April, followed by subsequent disbursements.
It's however unclear of the values of those subsequent disbursements, neither the interest charged nor when such disbursements have to be repaid.
Nevertheless, where previously the "spot" was controlled by CB and trading had to be done under various forward rates to circumvent this situation, where the forward rates were the virtual spot rates, that however is now not the case, the sources said. Virtually all tenures are now being transacted in the foreign exchange market with the lifting of controls by the CB, they said.
However, for better or for worse, the current status of flux in the market will settle down only after next month's general elections, the sources said. Then the market for certain would know the policy direction set for the next five years by the new regime in power, they said.
The market would then be able to adjust its play accordingly, without being overshadowed by political uncertainty, as is the case currently.
Meanwhile, the government yesterday borrowed Rs 24,343 million from the market by selling Treasury (T) Bills. This is Rs 2,434 million more than the original borrowing figure of Rs 24,000 million.
Nevertheless, with pressure for rates to rise with liquidity tightening, reflected by increased money printing, the three and six month T-Bill issues saw their weighted average yields (WAYs) rise by three and five basis points each to 6.14% and 6.26% respectively, while the government through the CB kept the lid closed to prevent the WAY of the benchmark 12 month maturity also from rising, by borrowing a miserly Rs 802 million from this tenure, though offers received were many times that figure, at Rs 13,015 million.
Courtesy:Ceylon Financial Times 9 July 2015
