COLOMBO – Sri Lanka’s rupee closed at 202/303 in one week dollars on Wednesday (17) dealers said, amid record money printing, dollar surrender requirements and reserve outflows.
When the currency comes under pressure, spot trading usually stops and trading takes place in the short term forward market in spot next (value three days) or for settlement in a week. Deals were done around 202.50 intra-day in the one week market. Dollar liquidity was tight for smaller banks, dealers said.
Sri Lanka has placed surrender requirements for exporters and remittances. A dollar surrender is a intervention by the Central Bank against the exchange rate peg which is already weak adding new liquidity and taking dollars away from the market.
The rupee last closed in the one- week forward market at 199/201 to the US dollar on Tuesday (16) and spot next closed at 200.75 to the US dollar.
With the dollar yield higher than the rupee yield amid money printing, forward premiums have inverted. The spot/one year swap premium was as much as 400 basis points negative, market participants said.
In the secondary market bond yields remained unchanged on dull market trade, dealers said.
Sri Lanka’s debt office which was offered Rs 45 billion of bills to be sold in an auction on Wednesday, managed to sell only Rs 25.8 billion, leaving 42% of the bills unsold.
Meanwhile, a bond maturing on 15.12.2022 closed flat at 5.80/90% on Wednesday, while a bond maturing on 15.11.2023 closed at 6.25/35%, up from 6.20/30% on Tuesday (16), and a bond maturing on 01.12.2024 closed flat at 6.55/65%.
A bond maturing on 01.05.2025 closed at 6.80/7.00%, up from 6.70/85% from the previous day, while a bond maturing on 15.02.2026 closed at 7.10/20%, up from 7.00/15%, and a bond maturing on 15.08.2027 closed at 7.50/60, up from 7.40/50%. A bond maturing on 01.05.2029 closed at 8.00/30%, steady at 8.00/40% and a bond maturing on 15.05.2030 closed at 8.15/55%, up from 8.10/40%.