Rupee weakens on fears of more attacks; stocks rise slightly

Thursday, 25 April 2019 00:10 - - {{hitsCtrl.values.hits}}

Reuters: The rupee closed 0.2% weaker on Wednesday as worries over further explosions after the Easter Sunday blasts weighed on the currency while stocks rose a fraction after hitting a more than six year low.

The scale and sophistication of the Easter Sunday attacks on churches and hotels in Sri Lanka suggested the involvement of an external group such as Islamic State, the US Ambassador said on Wednesday, as the death toll from the bombings rose to 359.

Islamic State on Tuesday claimed responsibility for the coordinated bombings, the group’s AMAQ news agency said. The currency ended at 174.90/20 to a dollar, 0.2% weaker than Tuesday’s close of 174.60/70, market sources said.

Analysts fear it could weaken further due to outflows from stocks and Government securities.

The island nation’s currency gained 0.3% last week, and 4.4% so far this year, as exporters converted dollars amid stabilising investor confidence after the country repaid a $ 1 billion sovereign bond in mid-January.

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.

Bomb jitters continued on Wednesday with Police and Air Force Bomb Disposal Units conducting several controlled explosions on suspected vehicles and bags in and around the capital. An explosion went off on Monday in a van near a church where scores were killed the previous day, when Bomb Squad officials were trying to defuse it, a Reuters witness said.

The benchmark stock index ended 0.2% up on Wednesday at 5,413.55, after hitting its lowest since 7 December 2012. On Tuesday, it suffered its worst percentage fall since 14 February 2012. The exchange was closed on Monday following Sunday’s attack. Turnover came in at Rs. 1.98 billion ($11.33 million), more than three times this year’s daily average of Rs. 607.5 million. Last year’s daily average was Rs. 834 million.

Foreign investors bought a net Rs. 1.32 billion worth of shares on Wednesday, but they have been net sellers of Rs. 4.7 billion worth of equities so far this year. The latest instability comes after the island nation plunged into 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.