Rupee falls after surprise rate cut

Saturday, 24 August 2019 00:00 - - {{hitsCtrl.values.hits}}

Reuters: The rupee fell for the fifth straight session yesterday, after the Central Bank cut key monetary policy rates amid foreign outflows from government securities, and tracking other emerging currencies while stocks closed slightly weaker.

The central bank unexpectedly cut interest rates for the second time in four months to boost sluggish growth after tourism and investments plummeted following deadly Easter Day bomb attacks by Islamist militants.

The rupee ended 0.2% weaker at 179.80/180.30 per dollar, compared with Thursday’s close of 179.40/60, extending the loss in the last five sessions to 1.5%. The currency, however, is still up 1.8% this year.

Central Bank Governor Indrajit Coomaraswamy said a foreign fund, which had invested $ 700 million in Sri Lankan government securities, had been exiting and that had resulted some pressure on the local currency.

The Central Bank in its monetary policy rate statement said the depreciation pressure was expected to be short-lived.

Foreign investors bought net Rs. 0.61 million of government securities in the week ended 13 August, against year-to-date net foreign outflows of Rs. 28 billion, Central Bank data shows.

The benchmark stock index closed 0.1% lower at 5,898.47. The index posted a gain of 0.07% this week, after posting its first weekly decline in eight in the previous week.

Sri Lankan investors have been mainly in a wait-and-see mode since the main opposition party named a hardline former defence chief as its presidential candidate.

The market has been awaiting details of former defence chief Gotabaya Rajapaksa’s campaign as well as the identity of the ruling party’s Presidential candidate, who has yet to be announced, dealers said.

So far this year, the stock index has dropped about 2.5%.

Equity market turnover was Rs. 281 million ($ 1.56 million) yesterday, less than half of this year’s daily average of about Rs. 650 million so far. Last year’s daily average was Rs. 834 million.