March 2 (NewsWire) – NDB Securities has predicted that the Sri Lanka rupee is likely to further appreciate in the near term following the recent spike, the Daily FT reported.
One of Sri Lanka’s leading stock brokering companies said in a research note that the USD/LKR has appreciated by 0.9% since 23rd February 2023.
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In backing its outlook of a likely further appreciation of the Rupee, NDBS said a further improvement in the Current Account Deficit is likely due to a decline in the trade deficit and a healthy increase in tourism inflows and remittance flows.
NDBS pointed out that the increase in the average volume in the interbank forex market to US$ 42 million from the US$ 8-10 million that was reported in May/ June 2022 was the reason for the current development.
“The Central Bank of Sri Lanka (CBSL) has been a net buyer from the Forex market in the last three months from US$ 6 million in November to US$ 104 million in December and US$ 211 million in January,” NDBS said. “The CBSL also reduced the surrender requirement for export proceeds in February 2023, which has resulted in further strengthening the Forex market liquidity.”
“Banks are flushed with Forex liquidity. Forex conversion by exporters in anticipation of a further appreciation of the Sri Lanka rupee, a drop in importer demand, and a decline in the Current Account Deficit were the contributing reasons,” NDBS further revealed, citing its channel checks.
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