January 31, 2019 / 12:06 PM / in 3 months

Sri Lanka rupee gains on dollar sales; Fitch downgrades forecast

    COLOMBO, Jan 31 (Reuters) - Sri Lanka's rupee          rose
0.5 percent on Thursday, and posted a gain of 2.4 percent for
the month, as foreign investors purchased government securities,
while Fitch rating agency revised down forecast for the currency
for 2019 and 2020.
** Fitch Solutions Macro Research, a subsidiary under Fitch
Group in a report revised its average forecast for the rupee
weaker to 186.00 per U.S. dollar for this year and 192.00 in the
next year, from the previous 177.00 and 183.00 respectively. 
** "We expect the rupee to continue weakening over the short
term due to a worsening terms of trade, although the pace of
depreciation is likely to ease from what was seen during the
November/December 2018 constitutional crisis," it said.
** Sri Lanka's higher inflation trajectory relative to the
United States, the nation's need to accumulate dollars to repay
its external debt and to achieve the IMF's foreign reserves
target over longer term will likely see further weakness for the
rupee - Fitch. 
** The rupee closed at 178.40/60 per dollar, compared with
Wednesday's close of 179.30/60, market sources said. On Jan. 3,
the rupee dropped to an all-time low of 183.00 against the
dollar.    
** The currency has appreciated 2.4 percent so far this year. 
** Investor confidence in Sri Lanka is stabilising after the
country repaid a $1 billion sovereign bond in mid-January,
Central Bank of Sri Lanka Governor Indrajit Coomaraswamy told
Reuters on Monday.             
** Worries over heavy debt repayment after a 51-day political
crisis that resulted in a series of credit rating downgrades    
have dented investor sentiment as the county is struggling to
repay its foreign loans, with a record $5.9 billion due this
year, including $2.6 billion in the first three months. 
** The International Monetary Fund on Jan. 16 said it would
resume discussions for further disbursal of part of a $1.5
billion loan amid investor worries of heavy debt repayments.
** The rupee dropped 16 percent in 2018, and was one of the
worst-performing currencies in Asia due to heavy foreign
outflows.
** The rupee has declined 3.5 percent since a political crisis
started in October. The political crisis had dented investor
sentiment and delayed Sri Lanka's borrowing plans.
** Sri Lanka was plunged into political turmoil when President
Maithripala Sirisena abruptly removed Prime Minister Ranil
Wickremesinghe and then dissolved parliament. Wickremesinghe was
later reinstalled as premier. A court ruled the move was
unconstitutional. 
** The Colombo Stock Index        ended 0.02 percent weaker at
5,989.90 on Thursday. 
** Turnover was 442 million rupees ($2.48 million), nearly half
of last year's daily average of 834 million rupees.
** Foreign investors net sold 82.5 million rupees worth shares
on Thursday. They have been net sellers of 2.3 billion rupees
worth of stocks so far this year and 15.7 billion rupees since
the political crisis began on Oct. 26, 2018.
** For a report on global markets, click here            .
** For a report on major currencies, click       
    
    ($1 = 178.2500 Sri Lankan rupees)

 (Reporting by Ranga Sirilal and Shihar Aneez, Editing by Sherry
Jacob-Phillips)
  
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