Sri Lankan rupee ends near record low; shares edge higher

COLOMBO: The Sri Lankan rupee ended near record low on Wednesday due to continued outflows of foreign funds mainly from government bonds, as political uncertainty dented investor sentiment.

The currency fell 19 percent in 2018, making it one of the worst performing currencies in Asia, as heavy foreign outflows from government securities weighed on the local currency.

The rupee traded at an all-time low of 183.00 hit on Monday against the dollar before ending at 182.80/183.00 per dollar, compared with 182.70/90 in the previous session, market sources said.

The local currency has weakened about 5.4 percent since Sri Lanka's political crisis began on Oct. 26.

The country's central bank will continue to adopt an exchange rate policy, with cautious interventions at times of excessive volatility in the forex market, central bank chief Indrajit Coomaraswamy said on Wednesday, launching 2019's economic policies.

The policy is designed to maintain the competitiveness of the exchange rate and support the rebalancing of the current account, thereby supporting a gradual buildup of foreign exchange reserves as an external buffer, he added.

President Maithripala Sirisena appointed a cabinet of ministers from his rival party on Dec. 21 after he was forced to reinstate Ranil Wickremeinghe as prime minister, 51 days after he was sacked.

The political crisis is expected to ease, though uneasy relations between the two men could cause fiscal problems, analysts have said. Parliament has approved 1.77 trillion rupees ($9.39 billion) to meet the first four months of expenditures in 2019 and avert a government shutdown from Jan. 1.

Foreign investors were net buyers of 19.2 million rupees ($105,032.82) worth of shares on Wednesday but they have been net sellers of 13.4 billion rupees worth of stocks since the political crisis began. The bond market saw outflows of about 67.6 billion rupees between Oct. 25 and Dec. 26, central bank data showed.

Last year, there were 22.8 billion rupees of outflows from stocks, while government securities suffered a net 159.8 billion rupees of outflows through Dec. 26, the latest data from the bourse and central bank showed.

The Colombo stock index ended 0.16 percent firmer at 6,062.20 on Wednesday, The bourse lost 5 percent in 2018. Turnover was 211.5 million rupees, well below last year's daily average of 834 million rupees.

Credit agencies Fitch and S&P downgraded Sri Lanka's sovereign rating in early December, citing refinancing risks and an uncertain policy outlook.