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Message: <blockquote data-quote="earthling" data-source="post: 26553508" data-attributes="member: 967">Sri Lanka forex swap rates plunge as outright rupee/dollar market dries upSri Lanka’s implied forward exchange rates have plunged in dollar/rupee swap markets as money printing depressed rupee yields and the forex shortages and downgrades that came in its wake drove up domestic dollar yields to double digits.Outright trading in the spot and forward markets have dried up after the central bank ordered dealers not to trade above 200 to the US dollar.Giving forward cover to importers has already been banned. Interbank forwards are permitted to facilitate swaps.Swap rates have been quoted and traded at steep discounts implying one year forwards at below 180 rupees with inflation differential inverted despite having a weak currency and money printing draining forex reserves steadily.Spot trades are not permitted above 200 to the US dollar.With no trading in the forex market and some running negative net open positions, banks have been forced to limit import letters of credit except to existing clients, market participants said.Without a working forex market, banks have to run net open positions to cover LCs on the due date.Sri Lanka’s central bank offered zero cost swaps for anyone who wants to borrow dollars, though in the market, swaps are going at a discount.Sri Lanka this week raised fuel prices, in a bid to reduce pressure on domestic dollar markets. However Sri Lanka has over 110 billion rupees of excess liquidity in money markets, indicating potential reserve losses of around 500 million dollars at current exchange rate if credit continues to grow.<a href="https://economynext.com/sri-lanka-forex-swap-rates-plunge-as-outright-rupee-dollar-market-dries-up-83069/" target="_blank">https://economynext.com/sri-lanka-forex-swap-rates-plunge-as-outright-rupee-dollar-market-dries-up-83069/</a></blockquote>

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