Central Bank purchases US$ 193 mn in FX in May

Reflecting the adequate availability of foreign currency in the domestic foreign exchange market, the Central Bank bought another US$ 224.5 million from the banking system in May, but less than half of the amount bought in April.

With the sale of US$ 32.0 million back to the markets, the Central Bank ended up being a net purchaser of foreign exchange by US$ 192.5 million in May.

This is a sharp decline from the US$ 419.5 million purchased in April by the Central Bank on a net basis. The decline should not be a cause for any anxiety as there could be variations between months over the amount Central Bank may buy and sell from the foreign exchange markets for different reasons.

Relative to April, the rupee came under a bit of a depreciation pressure in May due to the slowdown in tourism earnings owing to seasonal factors.
The earnings from exports and remittances remain robust.

The rupee which was up by 9.0 percent against the dollar in the year to April trimmed the appreciation to 7.3 percent in the 
year to May.

Year-to-date, the rupee was up by 6.6 percent and it was trading at an average of 303.78 through last week to a US dollar.

Despite the variations between months, the Central Bank has consistently been a net absorber of dollars from the banking system so far this year.

In the five months through May, the Central Bank has bought a staggering US$ 1,812.4 million on a net basis, which works out to an average of US$ 363 million in net absorptions per month.

These net absorptions go to rebuilding the gross official reserves of the country.

And by the end of May, the reserves were at US$ 5,421 million, the highest since December 2020 when Sri Lanka was servicing its debt.