ER Continues To Plummet

The exchange rate (ER) week on week deteriorated by 40 Sri Lanka cents (SLc) to Rs. 127.10 in interbank spot trading against the US dollar ($) last week on the back of import pressure, while the state stayed away from the market, a source told this newspaper.
The ER during the past two weeks has had deteriorated by 90 SLc (see also the business pages of last week’s The Sunday Leader). Friday was a holiday for the market on account of Prophet Mohamed’s birthday.
On Tuesday, the ER plummeted by 20 SLc amidst import pressure over that of Monday’s close to Rs. 126.75 in interbank spot trading against the $ over the previous day’s two way quotes figure of Rs. 126/50/60, before further weakening to Rs. 127 by Wednesday.
Generally the middle rate in two way quotes is considered the rate at which trades are executed.
However that may be, the ER which opened strong at the beginning of last week (Monday) at the Rs. 126/50/60 levels in two way quotes in interbank spot trading against the $, weakened to 126/70 during the day amidst import pressure, before stabilising at the Rs. 126/60/65 level on that day itself, a  source said.
On the previous market day (January 18) it traded at the Rs.126/65/75 level in two way quotes (see also the business pages of last week’s The Sunday Leader newspaper).
A weak ER is good for exporters because they get more rupees for their $s. On the other hand as Sri Lanka is an import dependent nation, a weak ER makes essential imports such as imported medicines and dhal dearer, hitting the poor, the vulnerable and the fixed wage earner the hardest.