Rupee extends gains on dollar sales by banks; stocks steady

Reuters: The rupee closed firmer for a second straight session on Friday, helped by dollar selling by banks and after the IMF said it would resume discussions with the island nation for further disbursal of part of a $ 1.5 billion loan and the Central Bank chief said around $ 5 borrowing in the pipeline could help debt repayments.

Sri Lanka will receive a loan of $ 1 billion from Bank of China before the end of the January-March quarter, Central Bank Governor Indrajit Coomaraswamy told Reuters on Thursday, and is in discussions to borrow nearly $ 5 billion to help the country meet repayments in the coming months.

Sri Lanka 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. 

After a meeting with Sri Lanka’s Finance Minister Mangala Samaraweera, the International Monetary Fund (IMF) said on Wednesday the discussions would resume in February, after a political crisis led to talks being delayed by three months. 

The rupee ended at 181.50/65 per dollar on Friday, compared with 181.60/75 in the previous session, with a foreign bank selling dollars, market sources said. On 3 January, the rupee fell to an all-time low of 183 against the dollar.

The rupee fell 19% in 2018, making it one of the worst-performing currencies in Asia, according to Refinitiv data, due to heavy foreign outflows.

Coomaraswamy on Thursday said the sharp depreciation was a powerful “pro-growth inducement” for the country’s exports.

The rupee has declined 4.7% since a political crisis started in October. That crisis had dented investor sentiment and delayed Sri Lanka’s borrowing plans.

A series of credit rating downgrades have made it harder for Sri Lanka to borrow as it faces record-high repayments.

The Colombo Stock Index ended 0.02% weaker at 5,988.07 on Friday. The benchmark index lost 5% in 2018.

Turnover was Rs. 660.8 million ($ 3.64 million), less than last year’s daily average of Rs. 834 million.

Foreign investors sold a net Rs. 410.5 million worth of shares on Friday. They have been net sellers of Rs. 15.7 billion worth of stocks since a political crisis began on 26 October 2018. The bond market saw outflows of Rs. 77.9 billion between 25 October 2018 and 9 January, the latest Central Bank data showed.

Foreign investors pulled a net Rs. 22.8 billion out of stocks last year, while they net sold Rs. 159.8 billion from government securities from January through 26 December 2018, bourse and Central Bank showed data.