Sri Lanka relaxes forward forex curbs, bank open positions

Jan 02, 2013 (LBO) – Sri Lanka has relaxed curbs on foreign exchange forward deals introduced last year and widened the net open positions for banks with effect from today, Central Bank Governor Nivard Cabraal said. Cabraal said Sri Lanka was estimated to have posted a 100 million dollar surplus in the balance of payments in 2012 and 6.5 percent gross domestic product growth. Selected derivative products will also be allowed to be developed within broad guidelines to be issued in 2013 Cabraal said delivering a monetary policy road map for 2013.

The Central Bank slapped trading curbs on banks during a balance of payments crisis last year.

Narrowing open forex positions of banks increase volatility in exchange rates as banks cannot carry over substantially forex holding overnight, reducing the depth of the market.