Sri Lanka's rupee closed weaker on Monday, hovering near a seven-month closing low hit last week, as foreign fund outflows after the central bank's rate cut weighed on the currency. Foreign investors sold net 12.3 billion rupees worth of government securities in the week ended Aug. 28, the second worst weekly outflow in eight months.
They offloaded government securities worth of 25.2 billion rupees in the two weeks ended on Aug. 28, data showed, extending the year-to-date net foreign outflow to 53.2 billion rupees, central bank data showed. A surprise rate cut on Aug. 23 has accelerated the outflow, currency dealers say. The central bank lowered rates for the second time in four months to boost sluggish growth after tourism and investments plummeted following deadly Easter Day bomb attacks by Islamist militants.
The rupee ended 0.4% weaker at 179.75/85 per dollar, compared with Friday's close of 179.00/20. The currency is up 1.6% this year. The rupee eased 1.5% in August as foreign investors sold government bonds in line with exit from other emerging markets. Central Bank Governor Indrajit Coomaraswamy after the policy rate cut on Aug. 23 said the bank was ready to cope with the outflow of total $700 million foreign funds invested in Sri Lankan government securities. Exit of some funds had resulted in some pressure on the local currency.
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