(Colombo) REUTERS: Sri Lanka’s rupee ended a tad firmer yesterday, ending a five session losing streak, but worries over further foreign outflows after the Central Bank cut key monetary policy rates weighed on sentiment. Stocks closed weaker for the fourth straight session.
Foreign investors sold net Rs.12.9 billion worth of government securities in the week ended August 21, the worst weekly outflow in eight months and the year-to-date net foreign outflow was at Rs.40.9 billion, the Central Bank data shows.
That worst outflow came before the Central Bank unexpectedly cut interest rates on Friday, its second easing in four months, to boost sluggish growth after tourism and investments plummeted following deadly Easter Day bomb attacks by Islamist militants.
The rupee ended 0.2 percent firmer at 179.60/70 per dollar, compared with Friday’s close of 179.80/180.30. It was the first gain in six sessions. The currency, however, is still up 1.7 percent this year.
The rupee has eased 1.8 percent this month as foreign investors sold government bonds tracking the foreign exit from emerging markets. Central Bank Governor Indrajit Coomaraswamy on Friday said the Central Bank was ready to cope with the outflow of total US $ 700 million foreign funds invested in Sri Lankan government securities. Exit of some funds had resulted some pressure on the local currency.
The Central Bank in its monetary policy rate statement said the depreciation pressure was expected to be short-lived.
Meanwhile, the main benchmark stock index fell for the fourth straight session yesterday and ended 0.28 percent lower at 5,881.72. The index posted a gain of 0.07 percent last week, after posting its first weekly declines in eight in the previous week.
Sri Lankan investors have been mainly in a wait-and-see mode since the main opposition party named a hardline former defence chief as its presidential candidate.
The market has been awaiting details of former defence chief Gotabaya Rajapaksa’s campaign as well as the identity of the ruling party’s presidential candidate, who has yet to be announced, dealers said.
So far this year, the stock index has dropped about 2.8 percent.
Equity market turnover was Rs.281.2 million yesterday, less than half of this year’s daily average of about Rs.648.5 million so far. Last year’s daily average was 834 million.