Rupee hits record low, stocks close weaker amid continued political uncertainty

Tuesday, 20 November 2018 01:06 - - {{hitsCtrl.values.hits}}

Reuters: The rupee fell to an all-time low of 177.35 per dollar on Monday, as political uncertainty outweighed the positive impact of a policy rate hike, sources said.

Stocks closed weaker for the second straight session due to political uncertainty and the policy rate hike.

The political uncertainty remained the main concern of investors a day after President Maithripala Sirisena asked an all-party meeting to hold a third vote on a no-confidence motion against Prime Minister Mahinda Rajapaksa after rejecting the first two motions passed by a majority in the parliament, deepening the country’s political crisis.

The Central Bank on Wednesday unexpectedly raised its key policy rates, in a move aimed at defending a faltering rupee as foreign capital outflows pick up amid an escalating political crisis and rising US interest rates.

The rupee hit a fresh low of 177.35 per dollar on Monday, surpassing its previous low of 176.80 hit on Thursday.

The currency ended at 177.30/50 per dollar on Monday, compared with 176.60/80 at previous close. It has weakened more than 2.4% since the political crisis began on 26 October and more than 15.4% so far this year.

Foreigners sold a net Rs. 147.1 million worth of stocks on Monday. They have offloaded equities worth 7.8 billion rupees since the political crisis started on 26 October.

The bond market saw outflows of about Rs. 22.9 billion between 25 October and 7 November, Central Bank data showed. This year, there have been Rs. 17.3 billion of outflows from stocks and Rs. 112.8 billion from government securities, Bourse and Central Bank data showed.

The Colombo stock index fell 0.13% to 5,947.90 on Monday. It declined 0.39% last week after falling 1.9% in the previous week. Heavy retail investor buying had lifted it 4.5% in the week before. It has slipped 6.5% so far this year.

Stock market turnover was Rs. 299.6 million ($1.70 million) on Monday, well below this year’s daily average of Rs. 838.1 million.