Rupee ends 1% firmer on dollar sales

REUTERS: The rupee ended over 1% firmer on Friday, posting a weekly gain of 2.8%, as foreign investors purchased Government securities after an IMF statement and the Government’s $ 1 billion debt repayment boosted confidence.

The rupee closed at 176.60/177.00 per dollar, compared with Thursday’s close of 178.40/60, market sources said. The currency has appreciated 3.4% so far this year. 

Investor confidence in Sri Lanka is stabilising after the country repaid a $1 billion sovereign bond in mid-January, Central Bank Governor Indrajit Coomaraswamy told Reuters on Monday. 

Worries over heavy debt repayment after a 51-day political crisis that resulted in a series of credit rating downgrades dented investor sentiment as the country is struggling to repay its foreign loans, with a record $ 5.9 billion due this year, including $ 2.6 billion in the first three months.

The International Monetary Fund (IMF) on 16 January said it would resume discussions in February for further disbursal of part of a $ 1.5 billion loan. Fitch Solutions Macro Research, a subsidiary under Fitch Group, on Thursday downgraded its average forecast for the rupee to 186 per US dollar for this year and 192.00 in the next year, from 177.00 and 183.00 respectively.

“It expected the rupee to continue weakening over the short term due to a worsening terms of trade, although the pace of depreciation is likely to ease from what was seen during the 2018 constitutional crisis.” 

 The rupee dropped 16% in 2018, and was one of the worst-performing currencies in Asia due to heavy foreign outflows. 

The political crisis had dented investor sentiment and delayed Sri Lanka’s borrowing plans. Sri Lanka was plunged into political turmoil when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved Parliament. Wickremesinghe was later reinstalled as Premier. A court ruled the move was unconstitutional. 

The Colombo Stock Index ended 0.13% weaker at 5,982.05 on Friday. The bourse rose 0.06% for the week, but declined 1.03% in January. 

Turnover was Rs. 810.6 million ($4.59 million), less than last year’s daily average of Rs. 834 million. 

Foreign investors net sold Rs. 82.5 million worth shares on Thursday. They have been net sellers of Rs. 2.3 billion worth of stocks so far this year and Rs. 15.7 billion since the political crisis began on 26 October 2018.