Political crisis precipitates rupee dip

The unprecedented political crisis continues to weaken the rupee, reducing its value by over 13% year to date, with developments since 26 October contributing to over 15% of the overall dip.

The rupee on spot contracts closed last week lower at Rs. 176.50/65 subsequent to hitting an intra-week low of Rs. 176.80 and a high of Rs. 175.60.

Wealth Trust Securities attributed the dip to importer demand and buying interest by banks. 

In the previous week, the prevailing political uncertainty along with foreign outflows from capital markets saw the rupee on spot contracts depreciating further to Rs. 175.10/25.

In the week ended 26 October, when President Sirisena removed Ranil Wickremesinghe as Prime Minister and appointed Mahinda Rajapaksa, the spot contracts was Rs. 173.05/20.

According to Central Bank data during the year up to 16 November the rupee has depreciated 13.4% against the dollar. Up to 26 October, the rupee dip against the dollar was 11.6%.

Central Bank quoted the average dollar rate as of last week at Rs. 176.17, as against Rs. 174.77 a week before and Rs. 153.62 a year ago.

Year to date (as of end last week) the rupee’s dip against the euro was 8.8%; against the pound sterling it was 9%; and by 13% against the Japanese yen and near 3% against the Indian rupee.