Rupee falls in thin trade after deadly Easter explosions

Tuesday, 23 April 2019 00:00 - - {{hitsCtrl.values.hits}}

Reuters: The rupee fell 0.4% on importers’ dollar demand in thin Monday trading, after deadly explosions rocked the Indian Ocean island on Easter Sunday that killed at least 290 people.

Sri Lanka said yesterday it was invoking emergency powers in the aftermath of devastating bomb attacks on hotels and churches, blamed on militants with foreign links, in which 290 people were killed and nearly 500 wounded.

The Colombo Stock Exchange was closed yesterday due to Sunday’s attack.

Investors kept away due to a curfew declared on Sunday. It was lifted at 6 a.m. yesterday, but the Government has again declared curfew from 8 p.m.

The currency ended at 174.60/70 to a dollar, weaker than Thursday’s close of 173.95/174.25, market sources said. The markets were closed on Friday for a public holiday. The island nation’s currency gained 0.3% last week, and 4.6% so far this year, as exporters converted dollars amid stabilising investor confidence after the country repaid a $ 1 billion sovereign bond in mid-January.

Analysts expect both stocks and rupee to plunge after the Easter Sunday attacks. An explosion went off yesterday in a van near a church in Sri Lanka where scores were killed the previous day, when bomb squad officials were trying to defuse it, a Reuters witness said. The latest instability comes after the island nation plunged into a political turmoil in October last year 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 impact of the latest instability after the explosions are yet to be seen, analysts said.

The rupee dropped 16% in 2018, and was one of the worst-performing currencies in Asia due to heavy foreign outflows. Foreign investors sold a net Rs. 6.6 billion worth of government securities in the week ended 17 April, the third weekly fall in seven weeks, the latest Central Bank data showed.