(Colombo) REUTERS: Sri Lanka’s rupee slipped yesterday amid worries over further foreign fund outflows after the Central Bank cut key monetary policy rates. Shares snapped four straight sessions of falls as investors picked up beaten-down banking and diversified stocks.
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 showed.
This 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 0.1 percent weaker at 179.75/85 per dollar, compared with Monday’s close of 179.60/70. The currency, however, is up 1.7 percent
The rupee has eased 1.8 percent this month as foreign investors sold government bonds in line with exit from other 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 in 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 ended 0.46 percent firmer at 5,908.93. It posted a gain of 0.07 percent last 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 2.4 percent. Equity market turnover was Rs.550.9 million yesterday, less than this year’s daily average of about Rs.647.9 million so far. Last year’s daily average was Rs.834 million.