Rupee appreciates against US dollar

Sunday, 24 November 2019

Sri Lankan rupee has appreciated by more than one rupee against the US dollar during the four days since the conclusion of the elections, the Central Bank of Sri Lanka (CBSL) says denying a statement made by Fitch Ratings.Issuing a statement on Thursday (21) Fitch Ratings said the Presidential Election significantly increases policy uncertainty and could prompt loosening that exacerbates fiscal weaknesses and a rollback of reforms. It said ‘political tensions could resurface ahead of elections to Parliament, where the UNP is the largest party’.

It added, these tensions could take place early next year, and President Gotabaya Rajapaksa’s constitutional reform plans could ‘resurrect controversial proposals to enhance the Executive’s powers.’Negating the claim CBSL pointed out that Fitch Ratings’ statement was based on ‘loose assumptions’ and ‘cannot be endorsed’ as it is conflicting with ‘actual market developments and expectations.’

The CBSL stated that the foreign exchange market along with debt and equity markets have responded well with the Presidential election’s outcome.“During this period, there has also been a sharp decline in the forward premia, reinforcing expectations of a further appreciation of the rupee,” it further added. “In the Government securities market, primary market yields declined sharply at the auction for Treasury Bills held on November 20, 2019 while the secondary market yields have also declined notably across the yield curve.”

The CBSL also said that “ISB yields have behaved orderly since the start of the business week. Foreign investors have continued to invest notable amounts of funds in the Sri Lankan rupee denominated Government securities”, and, “the All Share Price Index of the Colombo Stock Exchange has increased significantly over the past few days”.