ECONOMYNEXT – The Sri Lanka rupee strengthened against the US dollar on Tuesday from an all-time low the previous day on improving market sentiment while stocks closed flat, dealers and brokers said.
The rupee closed at 159.60/70 rupees against the US dollar in the spot market, strengthening from the previous day’s closing of 159.50/90 rupees.
Exporters continued to holdback conversions amidst importer demand but state-names selling US dollars to smaller banks eased the pressure on the currency, dealers said.
Analysts say if the Treasury wants to convert any dollars from foreign loans, they should be sold on the market, instead of being transferred to the central bank for new money, altering the monetary base.
In the past, sales of Treasury dollars to the central bank (unsterilized purchases) has helped worsen balance of payments pressure, during times of instability, analysts have pointed out.
Market sentiment were seen improving with central bank monetary policy being seen as appropriate and global oil prices easing in recent days , while there were also signs of foreign investor interest in bonds returning, dealers said.
Sri Lanka has also increased fuel prices, which will reduce credit pressure and curb consumption, helping match the external developments to the domestic economy.
Oil prices have also eased, which however may be due to an underlying strengthening of the US dollar.
Meanwhile, gilt yields edged lower in the secondary bond market.
A one-year Treasury bill which fell 4 basis points from a week earlier to 9.44 percent at Tuesday’s primary market auction traded at 9.35 percent in the secondary market.
A five-year bond maturing in 2023 closed at 10.42/45 percent in two-way quotes down from 10.45/50 percent the previous close.
A ten-year bond maturing in 2028 closed at 10.62/70 percent down from 10.67/75 percent the previous day.
In equities, the Colombo All Share index closed 0.06 percent lower, down 4.08 points to 6,348.53, and the S&P SL20 of more liquid stocks fell 0.19 percent to close 6.84 points lower at 3,538.15.
Market turnover was 876.4 million rupees, up 122.5 percent from the previous day.
Dialog (closing 20 cents lower at 14.20 rupees), Commercial Leasing and Finance (down 20 cents to 2.50 rupees) and LOLC (down 1.40 rupees to 108.60 rupees) weighed down the benchmark index.
Net foreign selling was 33 million rupees, against buying of 59.6 million rupees the previous day.
Foreign selling in Melstacorp (unchanged at 54.70 rupees) was 55 million rupees, followed by 43 million rupees in Commercial Bank (up 30 cents to 128.20 rupees), according to Asia Securities.
There was 51 million rupees of foreign buying in HNB (closing 1 rupee lower at 242 rupees).
Crossings, or off-market negotiated trades, totalled 117.3 million rupees and accounted for 13.4 percent of market turnover.
There was a crossing each in Melstacorp at 54.5 million rupees, Ceylon Tobacco (up 18.70 rupees to 1,118.70 rupees) at 38.5 million rupees and Lion Brewery (up 5.10 rupees to 579 rupees) at 24.3 million rupees. (COLOMBO, 12 June 2018)