February 15, 2018 / 12:30 PM / in 8 months

Sri Lankan rupee recovers as political uncertainty shows signs of easing

COLOMBO, Feb 15 (Reuters) - The Sri Lankan rupee ended firmer on Thursday, a day after hitting a record low, as exporters and banks sold dollars amid signs of political uncertainty easing, dealers said.

The rupee, which traded as low as 155.75 per dollar early in the day, ended at 154.90/155.00 per dollar compared with Monday’s close of 155.40/50.

The currency hit record low of 155.90 on Wednesday surpassing its previous closing low of 155 hit on Monday after the ruling coalition government suffered a shock defeat in local elections.

“There was exporter selling. The coalition government partners are in discussion to continue the government and there is some positive sentiment,” said a currency dealer.

There was no impact on the currency due to the central bank’s decision to leave the key policy rates steady before the market opened.

The central bank said the economy is growing below potential.

The local currency has weakened 0.95 percent so far this year.

The currency is expected to be pressured by continued demand from importers for dollars, dealers said.

They expect a gradual depreciation in the rupee and higher volatility this year on account of debt repayments by the government.

The domestic currency lost 2.5 percent last year and 3.9 percent in 2016.

President Maithripala Sirisena’s administration must repay an estimated 1.97 trillion rupees ($12.85 billion) in 2018 - a record high - including $2.9 billion of foreign loans and a total of $5.36 billion in interest.

Foreign investors sold a net 6.03 billion rupees worth of government securities in the week ended Feb 7.

With the outflow, foreign investors have turned net sellers of government securities worth 171.4 million rupees so far this year up to Feb. 7, central bank data showed.

Reporting by Ranga Sirilal and Shihar Aneez; Editing by Vyas Mohan

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