Sri Lanka ru­pee ends weaker on im­porter, bank dol­lar de­mand; stocks at 6-week low

The Financial Daily - - NATIONAL -

COLOMBO: Sri Lanka's ru­pee ended weaker on Tues­day as im­porter dol­lar de­mand and con­tin­ued out­flows of for­eign funds from gov­ern­ment bonds and stock mar­kets due to po­lit­i­cal uncer­tainty dented in­vestor sen­ti­ment. The bourse fell to a six-week low.

The Colombo Stock In­dex fell 0.51 per­cent to set­tle at 5,992.36, its low­est close since Nov. 28, as wor­ried in­vestors awaited po­lit­i­cal cues after the last quar­ter's tur­moil. The bourse lost 5 per­cent in 2018.

Turnover was 933 mil­lion ru­pees ($5.11 mil­lion), more than last year's daily av­er­age of 834 mil­lion ru­pees.

For­eign in­vestors were net sell­ers of 124.8 mil­lion ru­pees worth of shares on Tues­day. They have been net sell­ers of 13.9 bil­lion ru­pees worth of stocks since a po­lit­i­cal cri­sis be­gan on Oct. 26. The bond mar­ket saw out­flows of 74.3 bil­lion ru­pees be­tween Oct. 25 and Jan. 2, the lat­est cen­tral bank data showed.

Last year through Dec. 26, for­eign in­vestors pulled a net 22.8 bil­lion ru­pees out of stocks, and 159.8 bil­lion ru­pees from gov­ern­ment se­cu­ri­ties, ac­cord­ing to bourse and cen­tral bank showed data.

The ru­pee ended at 182.50/70 on Tues­day, com­pared with 182.30/40 in the pre­vi­ous ses­sion, mar­ket sources said. On Thurs­day, the ru­pee had fallen to an all-time low of 183.00 against the dol­lar.

The ru­pee fell 19 per­cent in 2018, mak­ing it one of the worst-per­form­ing cur­ren­cies in Asia, Refini­tiv Eikon data showed, due to heavy for­eign out­flows.

The ru­pee has de­clined about 5.2 per­cent 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.

That pol­icy is de­signed to main­tain a com­pet­i­tive ex­change rate and sup­port the re­bal­anc­ing of the cur­rent ac­count, thereby sup­port­ing a grad­ual build-up of re­serves, cen­tral bank chief In­dra­jit Coomaraswamy said on Wednes­day, un­veil­ing eco­nomic poli­cies for 2019.

Pres­i­dent Maithri­pala Sirisena ap­pointed a cab­i­net of min­is­ters from his ri­val party on Dec. 21 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 1.77 tril­lion ru­pees ($9.39 bil­lion) to meet the first four months of ex­pen­di­ture in 2019, avert­ing a gov­ern­ment shut­down from Jan. 1.

Sri Lanka plans to in­crease gov­ern­ment spend­ing by 13.2 per­cent from last year to 4.47 tril­lion ru­pees ($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.

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