Rupee hits record low

(Colombo) REUTERS: The Sri Lankan rupee fell to a record low of 176.60 to the U.S. dollar yesterday, as political uncertainty outweighed the positive impact of a policy rate hike, sources said.

Stocks closed weaker due to political uncertainty and the policy rate hike.

Before the market opened, the Central Bank unexpectedly raised its key policy rates, in a move aimed at defending a faltering rupee as foreign capital outflows pick up amid an escalating political crisis and rising U.S. interest rates.

Soon after the market opened, Parliament passed a no-confidence motion against newly appointed Prime Minister Mahinda Rajapaksa, a day after the Supreme Court stayed President Maithripala Sirisena’s decree to sack Parliament and call for early general polls, presenting a standoff with the opposition and throwing the country deeper into turmoil.

Parliament was dissolved on Friday, two weeks after Sirisena sacked Ranil Wickremesinghe as prime minister and appointed former president Mahinda Rajapaksa in his place.

The rupee ended at 176.50/60 per dollar yesterday, compared with the previous close of 176.05/30. It has weakened more than 1.7 percent since the political crisis began on October 26 and more than 14.7 percent so far this year.

Foreigners bought a net Rs.26.8 million worth stocks yesterday but have offloaded equities worth Rs.7.7 billion since the political crisis started on October 26.

The bond market saw outflows of about Rs.21 billion between October 25 and November 7, the Central Bank data showed. This year, there have been Rs.17.1 billion of outflows from stocks and Rs.110.8 billion from government securities, bourse and the Central Bank data showed.

The Colombo stock index fell 0.77 percent to 5,947.36 after falling 1.9 percent last week. Heavy retail investor buying had lifted it 4.5 percent in the week before. It has slipped over 6.6 percent so far this year.

Stock market turnover was Rs.729.2 million yesterday, less than this year’s daily average of Rs.846.4 million.