Fall of rupee, Bourse persists

Reuters: The rupee fell to its six-month closing low on Thursday as small-time foreign bondholders cut their exposure in high yielding Government securities amid US Treasury yields moving upward and importers buying dollars on fears over a further depreciation, dealers said.  The rupee ended 0.45% down at 128.00/10 per dollar, its lowest close since 19 December. It had closed at 127.45/50 on Wednesday. Two dealers said the lowest deal was done at 128.05.

“Some foreign investors sold their bonds to minimise their stake following the trend in other emerging markets,” a currency dealer from a foreign bank said. “It is due to the rise in US Treasury yields and not because Sri Lanka is doing bad.”

Local dealers said foreign banks were buying dollars as some overseas investors felt it was the best time to exit with the rupee and interest rates on a falling trend. They added importers were buying dollars on concerns that the local currency may fall further.

On Thursday, the Central Bank Deputy Governor said the monetary authority could take more steps to reduce high lending rates if commercial banks do not fall in line with monetary policy rate cuts.

The rupee has weakened 0.4% so far this year following a 10.7% depreciation in 2012 as the central bank allowed for a flexible exchange rate regime in February 2012. The rupee has fallen 1.23% so far this week.

Sri Lanka’s main stock index fell to a one-month closing low with trading volume slumping to a two-month low despite thin foreign buying.

 It fell 1.22%, or 76.89 points, to 6,207.87, its lowest close since 14 May.

 The market witnessed a net foreign inflow of Rs. 42.8 million, extending the net foreign buying in Sri Lankan shares to Rs. 16.1 billion so far this year.

The day’s turnover was at Rs. 480 million, the lowest since 12 April and less than half of this year’s daily average of Rs. 1.03 billion.