Rupee ends weaker; stocks retreat from 3-1/2-week high

Reuters: The Sri Lankan rupee ended weaker on Friday due to dollar demand as importers purchased the greenback after the local currency’s recent gains, sources said; while stocks slipped from a 3-1/2-week high hit in the previous session. 

The currency dipped 0.1% to end at 174.90/175.00 to the dollar, compared with Thursday’s close of 174.70/85. 

Though the island nation’s currency gained only 0.26% on the week, it rose 2.1% in the six sessions ended Tuesday. 

The currency gained 4.4% so far this year, as exporters converted dollars and foreign investors purchased government securities amid stabilising investor confidence after the country repaid a $1 billion sovereign bond in mid-January. 

Dealers expect the pressure on the rupee to ease with more inward remittances ahead of the Sinhala-Hindu New Year on 14 April.  The Colombo Stock Exchange index snapped a six-session winning streak to end 0.57% weaker at 5,621.36 on Friday. 

The index slipped from its highest close since 11 March, hit in the previous session. The benchmark stock index rose 1.15% during the week, recording its second consecutive weekly gain in nine. The index has declined 7.12% so far this year.

Sri Lanka’s Central Bank is expected to leave its key interest rates steady on Monday, a Reuters poll showed, but analysts aren’t ruling out an easing as the rupee steadies and policymakers aim to boost economic growth ahead of elections. 

Turnover came in at Rs. 219.98 million ($1.26 million), less than this year’s daily average of Rs. 632.3 million. Last year’s daily average came in at Rs. 834 million. 

Foreign investors sold a net Rs. 7.3 million worth of shares on Friday, extending the year-to-date net foreign outflow to Rs. 5.8 billion worth of equities.

Investor sentiment took a big hit as a result of the 51-day political crisis, leading to credit rating downgrades and an outflow of foreign funds from government securities. 

The rupee dropped 16% in 2018, and was one of the worst-performing currencies in Asia due to heavy foreign outflows. 

Foreign investors bought a net Rs. 1.6 billion worth of government securities in the week ended 27 March, the fourth net inflow in six weeks, extending year-to-date net foreign buying to Rs. 3.3 billion, the latest Central Bank data showed.