Rupee firmer on dollar sales; stocks climb

Reuters: The rupee closed firmer on Tuesday on banks’ dollar sales from inward remittances and on behalf of foreign investors who are purchasing short-term bills, while stocks ended firmer. 

The rupee closed at 180.90/15 per dollar, compared with Monday’s close of 181.40/60, market sources said. On 3 January, the rupee dropped to an all-time low of 183.00 against the dollar. 

The currency has appreciated 1.05% so far this year. 

Investor confidence in Sri Lanka is stabilising after the country repaid a $1 billion sovereign bond in mid-January, Central Bank Governor Indrajit Coomaraswamy told Reuters on Monday. 

However, investors maintained a cautious stance, awaiting cues about the Government’s borrowing and repayment of foreign loans, analysts told Reuters. The Government paid $1 billion five-year sovereign bond borrowing this month. 

Worries over heavy debt repayment after a 51-day political crisis have dented investor sentiment as the county is struggling to repay its foreign loans, with a record $5.9 billion due this year, including $2.6 billion in the first three months. The Central Bank Chief on 14 January said about $5 billion borrowing in the pipeline could help debt repayments. 

The International Monetary Fund on 16 January said it would resume discussions for further disbursal of part of a $ 1.5 billion loan amid investor worries of heavy debt repayments. 

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

The rupee declined 4.3% since a political crisis started in October. That crisis had dented investor sentiment and delayed Sri Lanka’s borrowing plans. 

Sri Lanka was plunged into political turmoil when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved Parliament. A Court later ruled the move was unconstitutional. Wickremesinghe was reinstalled as Premier. 

A series of credit rating downgrades after the political crisis made it tough for the island nation to borrow as it faces record high repayments. The Colombo Stock Index ended 0.4% firmer at 5,997.46 on Tuesday. The bourse dropped 0.16% last week, while the benchmark index lost 5% in 2018. 

Turnover was Rs. 841.9 million ($4.66 million), more than last year’s daily average of Rs. 834 million. Foreign investors net sold Rs. 382.1 million worth shares on Tuesday. They have been net sellers of Rs. 2.3 billion worth of stocks so far this year and Rs. 15.6 billion since the political crisis began on 26 October 2018. 

The bond market saw an inflow of Rs. 4.7 billion in the week ended 23 January. But the market saw an outflows of Rs. 81.9 billion between 25 October and 23 January, the latest Central Bank data showed.