Rupee ends weaker in dull trade; Bourse gains

Tuesday, 15 January 2019 01:00 - - {{hitsCtrl.values.hits}}

Reuters: Sri Lanka’s rupee closed weaker on Monday in thin trade due to dollar demand from banks and importers, while political uncertainty also dented investor sentiment.

Sri Lankan shares recovered from a more than six-week closing low hit on Friday to close slightly higher, driven by consumer staples and financials. The Colombo Stock Index ended 0.23 % firmer at 5,981.02, edging up from its lowest close since 26 November hit on Friday. The benchmark stock index lost 5 % in 2018.

Turnover was Rs. 1.5 billion ($8.24 million), well above last year’s daily average of Rs. 834 million. Foreign investors sold a net Rs. 418.9 million worth of shares on Monday.

They have been net sellers of Rs. 14.6 billion worth of stocks since a political crisis began on 26 October.

The bond market saw outflows of Rs. 77.9 billion between 25 October 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, Bourse and Central Bank showed data. The rupee, which traded 182.25 per dollar during the day, ended at 182.15/30 per dollar on Monday, compared with 181.90/182.00 in the previous session, market sources said. On 3 January, the rupee had fallen to an all-time low of 183.00 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. The rupee has declined about 5 % since the political crisis started.

The Central Bank said last week it would stick to an exchange rate policy of cautious intervention in times of excessive volatility in the forex market and maintain a competitive exchange rate and support the rebalancing of the current account, thereby supporting a gradual build-up of reserves.

The Central Bank on Wednesday said that the Reserve Bank of India (RBI) had agreed to provide $400 million to it under a regional swap facility and it had also requested a further bilateral swap arrangements of $1 billion.

Sri Lanka President Maithripala Sirisena appointed a cabinet of ministers from his rival party on 21 December after he was forced to reinstate Ranil Wickremesinghe as Prime Minister, 51 days after he was sacked.

The crisis is expected to ease, though tense relations between the two men could cause fiscal problems, analysts say. Parliament has approved Rs. 1.77 trillion ($9.39 billion) to meet the first four months of expenditure in 2019, averting a government shutdown from 1 January.

Sri Lanka plans to increase government spending by 13.2 % from last year to Rs. 4.47 trillion ($24.51 billion) in 2019, the Finance Ministry said on Tuesday.

Credit agencies Fitch and S&P downgraded Sri Lanka’s sovereign rating in early December, citing refinancing risks and an uncertain policy outlook.