Rupee hits record low amid continued political uncertainty

(Colombo) REUTERS: The Sri Lankan rupee fell to an all-time low of 177.35 per dollar yesterday, as political uncertainty outweighed the positive impact of a policy rate hike, sources said. Stocks closed weaker for the second straight session due to political uncertainty and the policy rate hike.

The political uncertainty remained the main concern of investors a day after President Maithripala Sirisena asked an all-party meeting to hold a third vote on a no-confidence motion against Prime Minister Mahinda Rajapaksa after rejecting the first two motions passed by a majority in Parliament, deepening the country’s political crisis.

The Central Bank on Wednesday 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.

The rupee hit a fresh low of 177.35 per dollar yesterday, surpassing its previous low of 176.80 hit on Thursday.

The currency ended at 177.30/50 per dollar yesterday, compared with 176.60/80 at previous close. It has weakened more than 2.4 percent since the political crisis began on October 26 and more than 15.4 percent so far this year.

Foreigners sold a net Rs.147.1 million worth of stocks yesterday. They have offloaded equities worth Rs.7.8 billion since the political crisis started on October 26.
The bond market saw outflows of about Rs.22.9 billion between October 25 and November 7, the Central Bank data showed. This year, there have been Rs.17.3 billion of outflows from stocks and Rs.112.8 billion from government securities, bourse and the Central Bank data showed.

The Colombo stock index fell 0.13 percent to 5,947.90 yesterday. It declined 0.39 percent last week after falling 1.9 percent in the previous week. Heavy retail investor buying had lifted it 4.5 percent in the week before. It has slipped 6.5 percent so far this year.

Stock market turnover was Rs.299.6 million yesterday, well below this year’s daily average of Rs.838.1 million.