(Colombo) REUTERS: Sri Lanka›s rupee fell further yesterday to close at its lowest level in more than seven months, due to continued foreign fund outflows from government securities after a surprise rate cut last month.
Foreign investors sold government securities worth of Rs.25.2 billion in the two weeks ended on Aug. 28, data showed, extending the year-to-date net foreign outflow to Rs.53.2 billion, Central Bank data showed.
Outflows from government securities have been settling, senior Deputy Governor of the Central Bank Nandalal Weerasinghe said yesterday.
The Central Bank lowered rates for the second time in four months on Aug. 23 to boost sluggish growth after tourism and investments plummeted following deadly Easter Day bomb attacks by Islamist militants.
The rupee ended 0.2 percent weaker at 180.75/90 per dollar, its lowest since Jan. 29. It closed at 180.45/75 on Wednesday. The currency is up 1 percent this year.
The rupee eased 1.5 percent in August as foreign investors sold government bonds in line with exit from other emerging markets.
Central Bank Governor Indrajit Coomaraswamy after the policy rate cut on Aug. 23 said the 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 0.19 percent weaker at 5,850.25. It fell 0.15 percent last week and 0.8 percent in August.
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 3.3 percent.
Equity market turnover was Rs.518.3 million (US$2.87 million) yesterday, less than this year’s daily average of about Rs.650.9 million so far. Last year’s daily average was Rs.834 million.
Foreign investors sold a net Rs.13.9 million worth of shares yesterday, extending the year to date net foreign outflow to Rs. 1.65 billion worth of equities, according to index data.