2 January 2019 10:22 am
(Colombo) REUTERS: The Sri Lankan rupee closed slightly firmer yesterday, but trade was thin as many foreign currency traders were on holiday for the New Year. Continued outflows of foreign funds mainly from government bonds due to political uncertainty dented investor sentiment.
The currency fell 19 percent in 2018, making it one of the worst performing currencies in Asia, as heavy foreign outflows from government securities weighed on the local currency.
The rupee hit an all-time low of 183.00 against the dollar on Monday, hitting a record low for a seventh straight session, surpassing its previous record of 182.90 marked in the prior session, Refinitiv Eikon data showed.
It has weakened about 5.3 percent since Sri Lanka’s political crisis began on Oct. 26. It lost 19 percent in 2018.
The rupee ended at 182.70/90 per dollar, compared with 182.80/183.00 in the previous session. It gained to 181.90 in the early trade, market sources said. President Maithripala Sirisena appointed a Cabinet of ministers from his rival party on Dec. 21 after he was forced to reinstate Ranil Wickremeinghe as Prime Minister, 51 days after he was sacked.
The political crisis is expected to ease, though uneasy relations between the two men could cause fiscal problems, analysts have said. Parliament has approved Rs.1.77 trillion (US$9.39 billion) to meet the first four months of expenditures in 2019 and avert a government shutdown from Jan. 1.
Foreign investors have been net sellers of Rs.13.3 billion worth of stocks since the political crisis began. The bond market saw outflows of about Rs.67.6 billion (US$370.21 million) between Oct. 25 and Dec. 26, Central Bank data showed. Last year, there were Rs.22.8 billion of outflows from stocks, while government securities suffered a net Rs.159.8 billion of outflows through Dec. 26, the latest data from the bourse and Central Bank showed. The Colombo stock market was closed yesterday for New Year. The main index fell 5 percent in 2018.
Credit agencies Fitch and S&P downgraded Sri Lanka’s sovereign rating in early December, citing refinancing risks and an uncertain policy outlook.