The Sri Lankan rupee ended down on Monday after hitting a record low during the day as foreign investors sold government securities following local election defeats at the weekend for ruling coalition parties. President Maithripala Sirisena's centre-left Sri Lanka Freedom Party (SLFP) and Prime Minister Ranil Wickremesinghe's centre-right United National Party (UNP) suffered defeats, raising concerns over the future of the unity government.
The surprise win by a political party backed by former President Mahinda Rajapaksa, who lost the presidential poll in 2015, could undermine the island nation's unity government and its reform agenda, analysts said. The rupee, which traded at record low of 155.00 during the day, ended at 154.95/155.05 per dollar on Monday, compared with Friday's close of 154.27/35 per dollar. It surpassed its previous all-time closing low of 154.60/70 hit on Tuesday. The markets will be closed for a public holiday on Tuesday. Normal trading will resume on Wednesday.
Rajapaksa's Sri Lanka Podujana Peramuna (SLPP) won control of 231 local councils out of a total 340 while Wickremasinghe's centre-right United National Party (UNP) took 34 councils and the rest were split among other parties. Rajapaksa on Monday called for fresh elections following the local council polls, which marked the strongest rebuff yet to the unity government.
"There were selling on (treasury) bonds by foreigners due to the political uncertainty and also the EU listing of Sri Lanka on a money laundering blacklist," said a currency dealer. "Rupee will be under pressure to depreciate until we see a solution to the political uncertainty or giving confidence to the market."
Last week the rupee held steady compared to the previous week, but it has fallen 0.95 percent so far this year, Thomson Reuters data showed. Dealers said they expected the currency to be pressured by continued demand by importers for dollars.
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