It seems as if the current exchange rate is too high for Sri Lanka, and yet, the economy is improving. Unfortunately, the government has not done much to help improve it. If only they would do something. The problem with the exchange rate of Sri Lanka is that the values are constantly changing.
The current value of the Sri Lankan dollar is valued at about 6 percent above that of many other countries around the world. This high value is what attracts investors to invest in Sri Lanka. Investments in a country’s currency to go up when there’s growth and go down when there’s a recession. Thus, the exchange rate is affected by this. But the Sri Lankan government has failed to do much to control the fluctuating exchange rate.
Over the last ten years or so the Sri Lankan government has been attempting to curb the damage to the national currency. They have implemented some measures to try and control the exchange rate. These measures included increasing the rate of the floating exchange rate and reducing the rate of the fixed rate. The intention was to get the national economy back on its feet. Unfortunately, these efforts have not been successful. In fact, they have actually made the situation worse.
Exchanges are just like any other market in which prices can vary from one market to another. When you purchase goods from somewhere in the world, they will be remitted to your bank in the form of a check. Once you have made the payment, the check is a legal proof that you received the goods at a particular exchange rate. With a similar setup, the Sri Lankan currency can also be traded.
In order to have a good idea of the exchange rate, it is advised that you get a reference from one of the many Sri Lankan institutions that can provide you with a decent list of the current rates. However, since the issue has been a headache for both the national government and private investors, the government has been less than forthright with regards to getting accurate information. For private investors, this can be a big problem, as they depend largely on the exchange rate for their businesses to be profitable. The following is an examination of how the exchange rate has affected the foreign exchange in Sri Lanka. As it stands now, the exchange rate is slightly higher compared to last year.
One of the reasons why the Sri Lankan currency has weakened is because it does not follow the US dollar. As previously mentioned, the Sri Lankan government has implemented a peg to the Sri Lankan dollar, so any change in the exchange rate means that the Sri Lankan currency would most likely become worthless. Currently, the Sri Lankan currency pairs are Pula-Sri Lanka, Pula-uran and Tirupati-Sri Lanka. If the exchange rate continues to be high, more international investors will gravitate towards Sri Lanka, but that will most likely change once the economy begins to pick up and sees the benefit of stable currency values. Currently, many investors do not like changing currencies often, so if the Sri Lankan dollar weakens, they will most likely still invest in the Sri Lankan currency.
Since the Sri Lankan government is not very communicative when it comes to their plans for exchange rates, many investors are left guessing at what the exchange rate will do next. Some believe that the weak economy will cause the exchange rates to drop, while others think that the government will simply wait for the currency to strengthen before changing it. Many of these experts subscribe to the “rule of two” theories, which basically states that if a country’s currency weakens in relation to another country, the first country’s currency usually devalues against its partner’s currency. However, there is no concrete evidence linking this theory to the recent depreciation in the Sri Lankan currency.
As with any Forex trading decision, it’s important to do your research before investing in any currency pair. Exchanging rates between countries is not as simple as running your fingers on each forefinger. It takes a great deal of knowledge about the current affairs and economics of both countries in order to determine which currency should be exchanged. This article is provided for information purposes only. Please consult a professional Forex broker for trading advice.