Rupee falls to record low; stocks gain

REUTERS: The rupee fell to an all-time low on Thursday, continuing its record-setting spree, as political uncertainty outweighed the positive impact of a policy rate hike, sources said. 

Stocks closed firmer for a fourth session in five, but turnover was dull due to political uncertainty and the policy rate hike. 

The Central Bank on Wednesday unexpectedly raised its key policy rates, in a move aimed at defending a faltering rupee as foreign capital outflows pick up amid an escalating political crisis and rising US interest rates. 

Sri Lanka appeared to have ground to a political halt on Thursday, with the Speaker of Parliament saying there was no functioning Prime Minister or Cabinet after a no confidence vote the previous day. 

Parliament passed the no confidence motion against PM Mahinda Rajapaksa and his Government with the backing of 122 of the 225 lawmakers, but President Maithripala Sirisena rejected it saying it appeared to have ignored the Constitution, Parliamentary procedure and tradition. 

Sirisena dissolved the Parliament last Friday, two weeks after he sacked Ranil Wickremesinghe as the Prime Minister, but the Supreme Court stayed his decree of sacking the legislature.  The rupee hit a fresh low of 176.80 per US dollar on Thursday, surpassing the previous record of 176.60 hit in the prior session. 

The currency ended at 176.60/80 per dollar, compared with the previous close of 176.50/60. It has weakened more than 1.8% since the political crisis began on 26 October and more than 15% so far this year.  Foreigners bought a net Rs. 23.4 million worth stocks on Thursday, but have offloaded equities worth Rs. 7.6 billion since the political crisis started on 26 October. 

The bond market saw outflows of about Rs. 21 billion between 25 October and 7 November, Central Bank data showed. This year, there have been Rs. 17.1 billion of outflows from stocks and Rs. 110.8 billion from government securities, bourse and Central Bank data showed.

The Colombo stock index rose 0.34% to 5,967.34 on Thursday after falling 1.9% last week. Heavy retail investor buying had lifted it 4.5% in the week before. It has slipped over 6.3% so far this year. 

Stock market turnover was Rs. 135.8 million ($ 771,152.75) on Thursday, its lowest since 6 September and well below this year’s daily average of Rs. 842.9 million.