Rupee hits record low amid dollar demand; foreign outflows weigh

28 December 2018 10:18 am - 0     - {{hitsCtrl.values.hits}}

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(Colombo) REUTERS: The Sri Lankan rupee fell to a record low yesterday amid dollar demand by state banks and continued outflows of foreign funds mainly from government bonds as political uncertainty dented investor sentiment.


The rupee hit an all-time low of 182.35 the dollar in early trade, surpassing its previous record of 181.85 marked in the prior session. It has weakened about 5 percent since Sri Lanka’s political crisis began on October 26 and lost 18.7 percent so far this year. 


The rupee ended at 182.10/60 per dollar, compared with 181.80/182.00 in the previous session.


President Maithripala Sirisena appointed the cabinet of ministers from his rival party last week after he was forced to reinstate Ranil Wickremesinghe as Prime Minister, 51 days after he was sacked.


The political crisis was expected to ease, though uneasy relations between the two men could cause fiscal problems, analysts have said. Parliament approved Rs.1.77 trillion to meet four months of expenditures and avert a government shutdown from January 1. 


The Colombo stock index ended 0.02 percent weaker at 6,018.19 yesterday. Turnover was Rs.338.1 million, less than half of this year’s daily average of Rs.840 million.


Foreigners were net sellers of Rs.6.4 million of stocks yesterday. They have been net sellers of Rs.13.3 billion since the political crisis began. The bond market saw outflows of about Rs.56.7 billion between October 25 and December 19, the Central Bank data showed. 


Five-year government bond yields have risen 35 basis points since the political crisis began. 


Credit agencies Fitch and S&P downgraded Sri Lanka’s sovereign rating in early December, citing refinancing risks and an uncertain policy outlook.

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