November 23, 2018 / 1:47 PM / 25 days ago

UPDATE 1-Sri Lankan rupee hits record low on Moody's downgrade, political uncertainty

(Adds latest foreign outflow from govt bonds)

COLOMBO, Nov 23 (Reuters) - ** The Sri Lankan rupee fell to an all-time low of 179.95 per dollar on Friday, as a Moody’s downgrade of the country’s credit rating in the wake of a political crisis saw more investors dump rupee-denominated assets.

** Moody’s downgraded Sri Lanka on Tuesday for the first time since it started rating the country in 2010, blaming the political turmoil for aggravating its already problematic finances.

** The downgrade coincided with a decision by the International Monetary Fund to delay discussions on its loan tranche to Sri Lanka.

** The political standoff took another turn on Friday when the lawmakers who back the newly appointed prime minister, Mahinda Rajapaksa - who has refused to resign despite losing two confidence votes in parliament - walked out of the chamber in the face of another defeat there.

** The political paralysis remains the main concern of investors. While Rajapaksa and President Maithripala Sirisena have failed to win support in parliament for their new government, the deposed prime minister Ranil Wickremesinghe’s coalition, which claims it does have majority support in parliament, has not been allowed to try to form a government.

** The central bank last week unexpectedly raised its main interest rates to defend the rupee, which has faltered as foreign capital outflows pick up due to the domestic crisis as well as rising U.S. interest rates.

** The rupee hit a fresh low of 179.95 per dollar on Friday, surpassing its previous low of 179.00 hit on Wednesday. Sri Lanka’s markets were closed on Thursday for a holiday.

** The currency ended at 179.90/180.40 per dollar on Friday, compared with 178.70/179.20 the previous session. It has weakened more than 3.8 percent since the political crisis began on Oct. 26 and more than 17 percent so far this year.

** Foreigners sold a net 51.4 million rupees ($287,000) worth of stocks on Wednesday, extending the outflow worth 7.8 billion rupees since the political crisis started on Oct. 26. The bond market saw outflows of about 29 billion rupees between Oct. 25 and Nov. 21, central bank data showed.

** This year, there have been 17.3 billion rupees of outflows from stocks and 118.8 billion rupees from government securities, the latest data from the bourse and central bank data showed.

** Five-year government bond yields have risen about 45 basis points since the political crisis unfolded.

** The Colombo stock index fell 0.34 percent to 5,929.98 on Friday. It declined 0.41 percent this week following a 0.39 percent fall last week. It has fallen 6.9 percent so far this year.

** For a report on global markets, click here. For a report on major currencies, click

** Stock market turnover was 580.8 million rupees on Friday, less than this year’s daily average of 835.8 million rupees. ($1 = 179.4000 Sri Lankan rupees) (Reporting by Shihar Aneez; Editing by Subhranshu Sahu and Hugh Lawson)

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