Rupee hovers near record low; stocks weak

Reuters: The rupee closed steady on Friday, hovering near its all-time low hit in the previous session, as political uncertainty outweighed the positive impact of a policy rate hike, sources said. 

Stocks closed weaker due to political uncertainty and the policy rate hike. 

The Parliament descended into chaos for a second day as lawmakers supporting MP Mahinda Rajapaksa threw books, chili paste and water bottles at the Speaker to try to disrupt a second no confidence motion. The vote went ahead anyway and for a second time, lawmakers turned against Rajapaksa and his new Government. It was not immediately clear if President Maithripala Sirisena would accept the vote and appoint a new Government. 

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

The rupee hit a fresh low of 176.80 per dollar on Thursday. 

The currency ended at 176.60/80 per dollar on Friday, unchanged from the previous close. It has weakened more than 2% since the political crisis began on 26 October and more than 15.1% so far this year. 

Foreigners sold a net Rs. 55.5 million worth stocks on Friday. They have offloaded equities worth Rs. 7.7 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 and bourse, Central Bank data showed. 

The Colombo stock index fell 0.20% to 5,955.43 on Friday. It declined 0.39% this week after falling 1.9% last week. Heavy retail investor buying had lifted it 4.5% in the week before. It has slipped 6.5% so far this year. 

Stock market turnover was Rs. 346.6 million ($ 1.96 million) on Friday, well below this year’s daily average of Rs. 840.6 million.