Sri Lanka rupee slips amid foreign fund outflow worries

COLOMBO: Sri Lanka's rupee slipped on Tuesday amid worries over further foreign fund outflows after the central bank cut key monetary policy rates. Shares snapped four straight sessions of falls as investors picked up beaten-down banking and diversified stocks. ** Foreign investors sold net 12.9 billion rupees worth of government securities in the week ended Aug. 21, the worst weekly outflow in eight months, and the year-to-date net foreign outflow was at 40.9 billion rupees, central bank data showed. ** This came before the central bank unexpectedly cut interest rates on Friday, its second easing in four months, to boost sluggish growth after tourism and investments plummeted following deadly Easter Day bomb attacks by Islamist militants.

** The rupee ended 0.1% weaker at 179.75/85 per dollar, compared with Monday's close of 179.60/70. The currency, however, is up 1.7% this year.

** The rupee has eased 1.8% this month as foreign investors sold government bonds in line with exit from other emerging markets.

** Central Bank Governor Indrajit Coomaraswamy on Friday said the central 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.

** The central bank in its monetary policy rate statement said the depreciation pressure was expected to be short-lived.

** Meanwhile, the main benchmark stock index ended 0.46% firmer at 5,908.93. It posted a gain of 0.07% last week.

** Sri Lankan investors have been mainly in a wait-and-see mode since the main opposition party named a former defence chief as its presidential candidate.

** The market has been awaiting details of former defence chief Gotabaya Rajapaksa's campaign as well as the identity of the ruling party's presidential candidate, who has yet to be announced, dealers said.

** So far this year, the stock index has dropped about 2.4%.

** Equity market turnover was 550.9 million rupees ($3.06 million) on Tuesday, less than this year's daily average of about 647.9 million rupees so far. Last year's daily average was 834 million.