Central Bank continues to collect foreign exchange from domestic market

13 February 2024 12:13 am - 8 - {{hitsCtrl.values.hits}}

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Continuing its months-long streak, the Central Bank purchased another US $ 245.3 million in foreign exchange from the domestic banking system and sold nothing in January, ending as a net purchaser of foreign currency to begin the year.

This is a sign of improving foreign currency liquidity in the domestic banking system further into the new year, when the Central Bank ended up purchasing US $ 1,895.87 million in 2023, reaching a record level, given the trying conditions prevailed in foreign currency conditions for most part of the year.

The Central Bank recently said these substantial net absorptions contributed immensely for it to be able to rebuild the reserves to US $ 4.4 billion by the end of 2023.

A month later, the reserves further rose by just shy of US $ 100 million to US $ 4,491.0 million by the end of January 2024.

The continued and relatively strong momentum also reflects as to why the rupee was most under appreciation pressure in January and also coming into February.

For instance, the rupee appreciated by 3.3 percent in the year through February 09 to an average of Rs.313.28 to a dollar, on top of a 12.1 percent gain in value in the currency in 2023.

Yesterday, the rupee ended at Rs.313.45/75 to a dollar.

A year earlier, the rupee was trading at Rs.364.66 to a dollar.

The relatively sizable dollar purchases by the Central Bank could also be to prevent any excessive appreciation pressure building up on the rupee, as the Central Bank has been saying that it would intervene to prevent excessive volatilities either way, despite maintaining a market determined exchange rate.

The normalised tourism earnings and remittance flows would further help the Central Bank to continue to purchase foreign currency from the market, helping to build up its gross official reserve buffers, as there are reserve targets to be met under the International Monetary Fund programme. Reports showed that the Central Bank has reached an understanding with the People’s Bank of China to extend the yuan-denominated currency swap, which has a dollar equivalence of 1.4 billion, till the end of this year, from its original expiry date of March 18.

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Comments - 8

warren Tuesday, 13 February 2024 09:12 AM

NPP guys, any negative comments? Because you are good at seeing dark clouds in sunny skies.

Dan Tuesday, 13 February 2024 09:19 AM

When major imports such as cars are restricted and when the majority don't have the spending capacity to purchase imported items, the central bank could collect foreign exchange as there is no demand to purchase dollars

Positivity Tuesday, 13 February 2024 10:16 AM

Mate.. do you ever see any good in anything? .. I am sorry to say but people like you are a curse to the country.. get rid of your negativity.. it’s not good to your health.

Leo Tuesday, 13 February 2024 10:37 AM

Here is a NPP guy. Always full of possitivity.

Dan Tuesday, 13 February 2024 02:08 PM

Positivity. What's positive on purchasing Dollars from a dormant economy as if they have achieved a great feat. Real achievement will be a country that can purchase Dollars from an economy functional in normal market conditions.

Sokrates Tuesday, 13 February 2024 11:23 AM

Sri Lanka has no foreign exchange reserves. All this money belongs to the creditors. Only when these "reserves" exceed Sri Lanka's debts does the country have reserves. Furthermore, manipulating foreign exchange rates is playing with fire that will set the economy on fire. The true value of the dollar is well over Rs 400. THE RUPEE MUST BE ALLOWED TO FLOW FREELY. The current undervaluation of the dollar by the central bank will stabilize the inflation rate a little, but will ruin the export economy. It also has a counterproductive effect on the tourism industry. Most tourists have a set vacation budget. For their dollars they get less rupees than the true value. This means that less rupees are spent and the tourism industry suffers.

Neel Ahemed Tuesday, 13 February 2024 12:44 PM

The CB of Srilanka interfering to the currency market give the negative effects to Srilankan who working in abroad. They are get used to send minimum amount to the home and rest will keep them with. At the end all the hard earned money will go to black market and we Srilankan still in the same. Currency market should be less control from the Center bank.

Freddy Krueger Tuesday, 13 February 2024 01:00 PM

to Sokrates, as the reply function does not work: How can the rupee freely float? That is just not possible, as the only place on this planet where you can get SL rupees is Sri Lanka. So there is no market at all. The exchange rate is made up by the central bank. There is no demand in the World for SL rupees, means - no demand - no price. And according to the debts of SL, the rupee against the USD should be at 1000, everything else is a hoax. And how much of SL's debt has been paid back so far? Nothing. And with the IMF Loan, SL has even more debts. And the country is still considered bankrupt in the world.

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Central Bank continues to collect foreign exchange from domestic market

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