Sri Lanka rupee falls to record low on continued political uncertainty

Sri Lanka rupee falls to record low on continued political uncertainty

The Sri Lankan rupee fell to an all-time low on Thursday, continuing its record-setting spree, as political uncertainty outweighed the positive impact of a policy rate hike, sources said.

Stocks closed firmer for a fourth session in five, but turnover was dull due to political uncertainty and the policy rate hike.

The central bank on Wednesday unexpectedly raised its key policy rates, in a move aimed at defending a faltering rupee as foreign capital outflows pick up amid an escalating political crisis and rising U.S. interest rates.

Sri Lanka appeared to have ground to a political halt on Thursday, with the speaker of parliament saying there was no functioning prime minister or cabinet after a no-confidence vote the previous day.

Parliament passed the no-confidence motion against recently appointed Prime Minister Mahinda Rajapaksa and his government with the backing of 122 of the 225 lawmakers, but President Maithripala Sirisena rejected it saying it appeared to have ignored the constitution, parliamentary procedure and tradition.

Sirisena dissolved the parliament on Friday, two weeks after he sacked Ranil Wickremesinghe as the prime minister, but the Supreme Court stayed his decree of sacking the legislature.

The rupee hit a fresh low of 176.80 per U.S. dollar on Thursday, surpassing the previous record of 176.60 hit in the prior session.

The currency ended at 176.60/80 per dollar, compared with the previous close of 176.50/60. It has weakened more than 1.8 percent since the political crisis began on Oct. 26 and more than 15 percent so far this year.

Foreigners bought a net 23.4 million rupees worth stocks on Thursday, but have offloaded equities worth 7.6 billion rupees since the political crisis started on Oct. 26.

The bond market saw outflows of about 21 billion rupees between Oct. 25 and Nov. 7, central bank data showed. This year, there have been 17.1 billion rupees of outflows from stocks and 110.8 billion rupees from government securities, bourse and central bank data showed.

The Colombo stock index rose 0.34 percent to 5,967.34 on Thursday after falling 1.9 percent last week. Heavy retail investor buying had lifted it 4.5 percent in the week before. It has slipped over 6.3 percent so far this year.

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Stock market turnover was 135.8 million rupees ($771,152.75) on Thursday, its lowest since Sept. 6 and well below this year’s daily average of 842.9 million rupees. ($1 = 176.1000 Sri Lankan rupees)