Rupee gains 1.5% on week; stocks steady

REUTERS: The rupee closed 0.4% stronger on Friday as dollar inflows from inward remittances ahead of the traditional New Year celebrations helped bolster the local currency, market sources said, while stocks ended firmer. 

The currency extended gains into a fourth session to end firmer at 175.35/50 to the dollar, up from Thursday’s close of 176.10/25. 

The island nation’s currency gained 1.5% for the week. 

The rupee has climbed 4.1% this year as exporters converted dollars and foreign investors purchased government securities amid stabilising investor confidence after the country repaid a $1 billion sovereign bond in mid-January. 

Dealers expect pressure on the currency to ease with more inward remittances ahead of the traditional Sinhala-Tamil New Year on 14 April. 

The Colombo Stock Exchange index ended 0.02% higher at 5,557.24 on Friday, moving further away from their lowest since 18 December 2012, hit earlier this week. 

The benchmark stock index rose 0.31% for the week, recording its first weekly gain in eight weeks. The index has declined 8.2% so far this year. 

The market awaits some positive news from the third and final vote on the 2019 Budget scheduled for 5 April, market sources said. 

Turnover was Rs. 326.6 million ($1.86 million), less than this year’s daily average of Rs. 650.9 million. Last year’s daily average came in at Rs. 834 million. 

Foreign investors bought a net Rs. 101.3 million worth of shares on Friday, but they have been net sellers of Rs. 6.1 billion worth of equities so far this year.

Sri Lanka was plunged into political turmoil in October 2018 when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved Parliament. A court later ruled the move was unconstitutional, and Wickremesinghe was reinstalled as Premier. 

Investor sentiment took a big hit as a result of the 51-day political crisis, leading to credit rating downgrades and an outflow of foreign funds from government securities. 

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

Foreign investors bought a net Rs. 3.5 billion worth of government securities in the week ended 19 March, the third net inflow in five weeks, turning year-to-date net foreign buying to Rs. 1.8 billion, the latest Central Bank data showed. 

The latest budget aims to increase government spending by 13% in 2019, during which the Presidential election must be held, while it has set an ambitious goal to reduce a large fiscal deficit.