Foreign exchange transactions relaxed
Posted on March 8th, 2010

Sri Lanka news

The Central Bank of Sri Lanka yesterday announced further relaxation of foreign exchange transactions with the following measures to be implemented with effect from March 11 in relation to foreign exchange transactions.

A Sri Lankan resident who is earning foreign exchange from investments abroad as approved by the Central Bank, engaged in providing international professional services in Sri Lanka or abroad, engaged in any occupation abroad or who have proceeded outside Sri Lanka for education and/or for medical treatment and exporters of goods will be permitted to open and maintain bank accounts abroad, the bank said.

The bank said that forward contracts in foreign currency to cover foreign exchange transactions related to trade in goods and services, remittances and approved foreign lending and borrowings, will also be permitted.

Under these measures the present 100 percent margin deposit requirement against advanced payments on the invoice value of selected items to be imported, will be removed.

The suspension on the pre-payment of import bills will be lifted.

Under this the existing different investment accounts, namely Share Investment External Rupee Accounts (SIERA), Treasury Bond Investment External Rupee Accounts (TIERA), Treasury Bill Investment External Rupee Accounts (TIERA-2), and Treasury Bill/Bond Investment External Rupee Accounts Deshabhimani (TIERA -D) maintained by non-residents in commercial banks will be permitted to be unified.

The unified account will be renamed as Securities Investment Account (SIA), the bank said.

The Central Bank states that the relaxation of these specific exchange controls would contribute to further improve investor confidence and stabilize the foreign exchange market, thereby paving the way to further integrate the Sri Lankan economy with the global economy.

Forex Capital Markets are foreign exchange markets where the currencies are been bought and sold continuously for profits. The capital markets of forex are present globally and transactions are non-stop in this forex cash market. Whether its Sydney or Tokyo, one would find aggressive forex dealers and brokers peering into their computer screens and on the telephone for minor changes that might affect this currency trade.

The forex trade is carried out for profits that can be gained by buying and selling of the currencies. Currencies are always bought and sold in pairs. Let us take an example to clarify the forex dealA trader trades in Euros/ Us Dollars. (All figures are samples only) He purchases 10,000 Euros on Jan 1 when the EUR/USD rate is .9600. Then he sells these Euros at the market rate of 1.1800. On August 1. Therefore he gets 11,800 USD. Thereby making a cool forex transaction profit of USD 2200.

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