Rupee ends weaker; stocks retreat from 3-1/2-week high

REUTERS: The Sri Lankan rupee ended weaker yesterday due to dollar demand as importers purchased the greenback after the local currency’s recent gains, sources said; while stocks slipped from a 3-1/2-week high hit in the previous session. 

The currency dipped 0.1 percent to end at 174.90/175.00 to the dollar, compared with Thursday’s close of 174.70/85. 

Though the island nation’s currency gained only 0.26 percent on the week, it rose 2.1 percent in the six sessions ended Tuesday.

The currency gained 4.4 percent so far this year, as exporters converted dollars and foreign investors purchased government securities amid stabilising investor confidence after the country repaid a US$1 billion sovereign bond in  mid-January. 

Dealers expect the pressure on the rupee to ease with more inward remittances ahead of the Sinhala-Hindu New Year on April 14. 

Sri Lanka was plunged into political turmoil in October 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. 

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

Foreign investors bought a net Rs.1.6 billion worth of government securities in the week ended March 27, the fourth net inflow in six weeks, extending year-to-date net foreign buying to Rs. 3.3 billion, latest Central Bank data showed. 

The Colombo Stock Exchange index snapped a six-session winning streak to end 0.57 percent weaker at 5,621.36 yesterday. 

The index slipped from its highest close since March 11, hit in the previous session. 

The benchmark stock index rose 1.15 percent during the week, recording its second consecutive weekly gain in nine. The index has declined 7.12 percent so far 
this year. 

The market awaits some positive news from the third and final vote on the 2019 budget that is underway, market sources said. 

Meanwhile, Sri Lanka’s Central Bank is expected to leave its key interest rates steady on Monday, a Reuters poll showed, but analysts aren’t ruling out an easing as the rupee steadies and policymakers aim to boost economic growth ahead of elections. 

Turnover came in at Rs.219.98 million (US$1.26 million), less than this year’s daily average of Rs.632.3 million. Last year’s daily average came in at Rs.834 million. 

Foreign investors sold a net Rs.7.3 million worth of shares yesterday, extending the year-to-date net foreign outflow to Rs.5.8 billion worth of equities. 

The latest budget aims to increase government spending by 13 percent in 2019, during which the Presidential Election must be held, while it has set an ambitious goal to reduce a large fiscal deficit.