Rupee extends losses on security alerts; stocks up in dull trade

(Colombo) REUTERS: The Sri Lankan rupee closed weaker for the fifth consecutive session yesterday, as security alerts on possible further attacks after the Easter Sunday bombings weighed on investor sentiment, while stocks extended gains into the fifth day after hitting a more than six-year closing low last week. 

Sri Lankan officials said yesterday security forces were maintaining a high level of alert after intelligence reports that Islamist militants were planning fresh attacks before the start of Muslim holy month of Ramadan. 

The U.S. Ambassador to Sri Lanka said yesterday that some of the Islamist militants behind the Easter Sunday bombings that killed more than 250 people were likely still at large and could be planning more attacks. 

The currency fell 0.3 percent to 176.00/30 per dollar, weaker than Monday’s close of 175.50/90, market sources said. 

Analysts fear it could weaken further due to outflows from stocks and government securities. 

The island’s currency lost 0.8 percent last week, but is up 4.1 percent so far this year, as exporters converted dollars amid stabilising investor confidence after the country repaid a US$1 billion sovereign bond in mid-January. 

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. 268.2 million worth of government securities in the week ended April 24, the first net buying in four weeks, but they have sold a net Rs. 6.6 billion worth of securities so far this year, the latest Central Bank data showed. 

The benchmark stock index ended 0.64 percent higher yesterday at 5,478.41, further moving away from its lowest close since Dec. 7, 2012 hit on April 23. On April 23, it suffered its worst percentage fall since Feb. 14, 2012. 

Turnover came in at Rs. 197.6 million (US$1.12 million), lower than this year’s daily average of Rs. 591.9 million. Last year’s daily average was Rs. 834 million. 

Foreign investors bought a net Rs. 39.9 million worth of shares yesterday, but they have been net sellers of Rs. 4.4 billion worth of equities so far this year. 

The latest instability follows Sri Lanka’s plunge into political turmoil in October last year, when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved parliament. A court later ruled the move 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.