Sri Lanka will widen a foreign exchange trading band gradually once inflows improve, and the rupee is heavily undervalued, Central Bank Governor Nandalal Weerasinghe said.
Sri Lanka is currently operating trading band at around 363.00 rupees with a variation margin of 2.60 rupees on either side.
“We will be gradually relaxing the band, once we start getting inflows,” Governor Weerasinghe told an investor forum organized by CT CLSA Securities, a Colombo-based brokerage.
The rupee was now ‘heavily undervalued’ based on fundamentals, he said.
In September the real effective exchange rate index was 81.3, far below 100.
However, the REER index was 91.5 in February, shortly before the rupee collapsed in March in a failed attempt to float it with a surrender rule intact.