Ease of forex rules won’t impact rates

By Dinali Goonewardene

Easing of forex rules for select activities will not have an impact on rates, banking sources told the Daily FT yesterday.

Noting that major currencies such as the US dollar, Sterling Pound and Australian dollar would be the most transacted sources said given the strong reserves situation, demand following new moves won’t have a major impact on forex rates.

The Central Bank said recently that gross official reserves continued to remain above the targeted level and stood at US dollars 7.5 billion by end June 2011, without Asian Clearing Union (ACU) balances. Based on the previous 12-month average expenditure on imports of US dollars 1,372 million per month, the gross official reserves without ACU balances were equivalent to 5.4 months of imports.

The rupee edged down to 109.94/95 a dollar from Wednesday’s close of 109.86/89 on dollar sales by banks.

 Currency dealers said the market did not react to the central bank’s further relaxation of foreign exchange controls, as players waited for further clarification on how foreign investors could invest in unit trusts.

The Central Bank on Tuesday relaxed restrictions for foreign investments in Unit Trusts, permitted Sri Lankan students to obtain loans from foreign financial institutions, permitted Sri Lankan residents to make payments to non residents to purchase real estate properties in Sri Lanka, permitted selected supermarkets to engage in the money changing business and granted permission to foreign nationals who are resident in Sri Lanka to open and maintain foreign currency accounts.