Rupee ends higher as banks sell dollars; stocks at near 4-month low ahead of policy rates review

(Colombo) REUTERS: The Sri Lankan rupee closed higher yesterday, a day ahead of the Central Bank’s policy rates review, boosted by dollar sales by banks in lacklustre trade, market sources said.

The stock market fell for the fourth straight session to a near four-month low as foreign investors exited from the island nation’s risky assets. The rupee ended at 179.45/65, compared with Wednesday’s close of 179.50/70.

Sri Lanka’s Central Bank is expected to leave its key interest rates steady today, a Reuters poll showed, as the island’s economy slowly recovers from a political crisis that sparked credit downgrades by all three major global rating agencies.

The local currency had posted a weekly loss of 0.42 percent in the last week due to high dollar demand from importers and outflows from the stock market.

It has risen 1.8 percent so far this year as exporters converted dollars and foreign investors purchased government securities amid stabilising investor confidence in Sri Lanka after the country repaid a US$1 billion sovereign bond in mid-january.

The bond market saw inflows of Rs.3.3 billion in the week ended Feb. 13, recording its fourth straight weekly inflow, the latest Central Bank data showed.

Worries over heavy debt repayment after a 51-day political crisis that resulted in a series of credit rating downgrades dented investor sentiment as the country is struggling to repay its foreign loans.

Sri Lanka has raised its borrowing limit for dollar-denominated bonds to US$3 billion and chosen seven lead managers to tap the international market as soon as possible, three government sources said on Tuesday.

The rupee dropped 16 percent in 2018, and was one of the worstperforming currencies in Asia due to heavy foreign outflows.

The Colombo Stock Exchange index fell 0.7 percent to 5,839.04 yesterday falling for the fourth straight session, its lowest close since Oct. 26.

The benchmark index had fallen 0.92 percent last week, after losing 0.3 percent in the previous week. It declined about 1 percent in January.

The turnover was Rs.1 billion, more than last year’s daily average of Rs.834 million.

Foreign investors were net sellers of Rs.43.1 million worth of shares yesterday, extending the year to date net foreign outflow to Rs.5.2 billion worth of stocks, and Rs.18.5 billion since the political crisis began on Oct. 26, 2018.