Falls 73 cents in seven days ER down Rs 150.19 2nd lowest value ever

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By 2016-11-04

By Paneetha Ameresekere

The exchange rate (ER) which fell below the Rs 150 mark for only the second time ever at Wednesday's trading sank further by a sharp 18 cents to 150.19 to the US dollar in its retail selling price by banks yesterday as well, as foreign exits from the Treasury (T) Bond and T Bill market continued to weigh down on the local currency.

The average retail price of the ER at 9:30 a.m. yesterday quoted by commercial banks in Colombo for telegraphic transfer was Rs 150.19 to the dollar, down 18 cents over the previous day's closing price of Rs 150.01, to fall to its second lowest value, ever. The lowest ever value the ER has fallen to is Rs 150.54 to the dollar, which was seven months ago on 30 March 2016. In the last seven market days to yesterday, the ER, in its retail selling price by banks to consumers, have deteriorated sharply by 73 cents to
Rs 150.19.

As Sri Lanka is an import dependent economy, a weak rupee induces supply side inflationary pressure, hitting the poor, the vulnerable and the fixed wage earner the hardest.A weak rupee also increases the Government of Sri Lanka's (GoSL's) debt profile as its foreign debt servicing costs are generally met, after buying the necessary dollars from the Central Bank of Sri Lanka's foreign reserves. This is because GoSL per se, is generally bereft of dollars.
However, a weak rupee may improve exporter competitiveness.

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