Sri Lankan Rupee top among emerging market currencies in Q1 2024
The Morning: Sri Lanka Rupee (LKR) ranks top performer among emerging market currencies in the first quarter (1Q) of 2024 with over 7 % spot returns, Bloomberg market data showed.
Accordingly, the Sri Lankan Rupee has recorded a spot return of 7.77% by the end of March claiming the top performer among the emerging market currencies.
Other currencies which have positive returns in the first quarter are the Mexican Peso with a 2.5% spot return and the Pakistani rupee with a 1.35% spot return.
Since the second half of 2023, the rupee has been ticking up as it appreciated by 12.1% against the US dollar in 2023.
According to Frontier Research, reserve accumulations which were driven by surpluses on the current account and financial accounts led to the rupee’s appreciation in 2023.
The current account surplus is likely to be around $1.3-1.5 billion for 2023, higher than the $1.2 billion surplus anticipated in the International Monetary Fund’s (IMF) first review. This overperformance was driven by remittances being close to $ 6 billion, goods exports being more resilient at just under $ 1 billion per month on average and goods imports not recovering towards late-2023.
“With both CBSL and banks likely comfortable in the FX reserves position, alongside seasonal favorability for tourism and remittance income, the LKR has been able to appreciate further in early 2024,” it said.
Also, the importers being cautious on account of uncertainty about consumer demand in the aftermath of the Value Added Tax (VAT) increase could be helping to keep demand for foreign exchange contained.
OSL take:
Sri Lanka’s economy has shown great resilience to external and internal shocks through the years and is once again on a growth path after facing challenging economic conditions due to the global pandemic and the economic crisis that followed. Despite the challenging economic conditions during the past few years, the country’s private sector managed to record profits along with several key economic sectors. Sri Lanka’s banking sector also showed great resilience amidst challenges. All these are indicative of a strong and resilient economy. Also, a strong banking sector is a pre-requisite for any country working towards achieving hub status in the region. With the country’s strategic positioning in the Indian Ocean and the many trade agreements as well as trade concessions enjoyed with other countries, Sri Lanka is fast becoming an emerging destination in the South Asian region. Realising the growth and business potential of the country, many foreign businesses/investors have expressed interest in exploring the expanding business/investment opportunities in Sri Lanka.
| Article Code : | VBS/AT/20240418/Z_1 |