Sri Lankan rupee saw significant appreciation during this week with the spot rate trading at 338/339 levels against the US dollar yesterday from over 360 levels at the start of the week on a flurry of positive developments and news on the foreign exchange market.
As a result the Central Bank gradually widened the forex trading band from the original Rs.2.60 to Rs.5.00 to Rs.7.50 to Rs.10.00 today (03).

With the continuous improvement in foreign exchange liquidity, the Central Bank yesterday said it decided to completely do away with the band effective from next market day which falls on Tuesday, next week.

Along with that the Central Bank will also do away with its dollar sell down rule on bank from next week after a week into relaxing the requirement to 15 percent from the earlier 25 percent levels.

Until this week, the licensed commercial banks and National Savings Bank were required to mandatorily sell 25 percent back to the Central Bank out of the converted inward worker remittances, converted services sector related export proceeds and receipts and the residual value of the mandatorily converted export proceeds of goods.

“We announce today, the guidance of 10.0 rupees will be removed from next Monday and there will be no mandatory purchases by the Central Bank from next Monday,” said the Central Bank Governor, Dr. Nandalal Weerasinghe.

“We are coming back to normal situation in the foreign exchange market now,” he added.

But the repatriation and conversion of foreign currency requirements would continue to stay.

However the Central Bank will continue to intervene in the market to rebuild its reserves and also to smoothen the excessive volatility, Governor Weerasinghe said.

The Central Bank had purchased US $ 308 million in foreign currency in the last 5 days, a record for such a short stretch, to prevent excessive appreciation of the rupee against the dollar.