Rupee hits record low as political turmoil mounts; Bourse remains up

Wednesday, 31 October 2018 00:00 - - {{hitsCtrl.values.hits}}

Reuters: The rupee slumped to a record low yesterday as escalating political turmoil sparked buying of US dollars by importers.

Stocks climbed for a third straight session to hit a nearly six-week closing high on retail investor buying.

But foreign investors exited after President Maithripala Sirisena sacked the prime minister unexpectedly and swore in the ex-president.

The rupee dropped to a record low of 174.75 per dollar yesterday, surpassing the previous record low of 174.30 hit on Monday.

The rupee ended at 174.60/80 per dollar yesterday, compared with previous close of 173.75/90.

The rupee weakened 3% so far this month after a 4.7% drop in September against the dollar. It dropped 13.5% so far this year.

Sri Lankan opposition leader Mahinda Rajapaksa was appointed prime minister on Friday after President Sirisena dismissed the incumbent in a surprise move that threatens political turmoil in the South Asian country. As president, the pro-China Rajapaksa ushered in billions of dollars of investment from Beijing to help rebuild the country following the end of a 26-year-long civil war against Tamil separatists in 2009.

The Colombo stock index ended 0.34% firmer at 5,964.32, its highest close since 19 September. The Bourse shed 3.6% last month and slipped 6.4% so far this year.

Analysts said retail investors, who have stayed away from the market during a number of investigations against market manipulation that allegedly occurred under the previous government, actively bargain-hunted after the president’s announcement.

Data from the Central Bank showed that foreign investors sold government securities worth a net Rs. 3.3 billion ($ 30.7 million) in the week ended 17 October. Sri Lanka has seen a net outflow of Rs. 85.9 billion in securities so far this year.

Stock market turnover was Rs. 981.4 million ($ 5.64 million) on Tuesday, more than this year’s daily average of Rs. 786.4 million.

Foreign investors were net sellers of shares worth Rs. 155.3 million yesterday, extending the year-to-date net foreign outflow to Rs. 12.7 billion worth of equities.

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