Rupee extends falls on fears of more attacks; stocks up in dull trade

Reuters: The rupee closed weaker for the fourth consecutive session yesterday, as worries about more attacks after the Easter Sunday bombings weighed on investor sentiment, while stocks extended gains into the fourth day after hitting a more than six-year closing low last week. 

Sri Lankan security officials have warned that Islamist militants behind Easter Sunday’s suicide bombings are planning attacks and could be dressed in uniform, as the Archbishop of Colombo complained about insufficient security around churches.  Police are trying to track down 140 people believed linked to Islamic State, which claimed responsibility for the Easter Sunday suicide bombings of churches and hotels that killed 253 people. 

The currency traded 0.2% weaker at 175.60 per dollar intraday before closing at 175.50/90, 0.1% lower than Friday’s close of 175.30/80, market sources said. 

Analysts fear it could weaken further due to outflows from stocks and government securities. The island’s currency lost 0.8% last week, but is up 4.1% so far this year, as exporters converted dollars amid stabilising investor confidence after the country repaid a $ 1 billion sovereign bond in mid-January. 

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. 268.2 million worth of government securities in the week ended 24 April, the first net buying in four weeks, but they have sold a net Rs. 6.6 billion worth of securities so far this year, the latest Central Bank data showed. 

The benchmark stock index ended 0.11% higher yesterday at 5,443.31, further moving away from its lowest close since 7 December 2012 hit last Tuesday. On Tuesday, it suffered its worst percentage fall since 14 February 2012. 

Turnover came in at Rs. 162.7 million ($ 926,537.59), its lowest since 14 February and less than a third of this year’s daily average of Rs. 597.1 million. Last year’s daily average was Rs. 834 million. 

Foreign investors bought a net Rs. 24.3 million worth of shares yesterday, but they have been net Rs. 4.4 billion worth of equities so far this year. 

The latest instability follows Sri Lanka’s plunge into political turmoil in October last year, when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved Parliament. A court later ruled the move unconstitutional, and Wickremesinghe was reinstalled as premier. 

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.