Sri Lankan rupee edged higher for the second session on Thursday after four straight days of losses, but traders said sectarian violence was still denting investor sentiment. Most investors have shied away from the market since the April 21 bombings that killed more than 250 people in coordinated attacks on churches and luxury hotels. Islamic State claimed responsibility. The rupee closed slightly firmer on dollar-selling by exporters and banks.
The rupee gained 0.2% to close at 175.90/176.10 per dollar, compared with Wednesday's close of 176.20/40, market sources said. Analysts expect the currency to weaken as money flows out of stocks and government securities. The rupee gained 0.6% last week and is up 3.8% for the year. Exporters had converted dollars as investor confidence stabilised after a $1 billion sovereign bond was repaid in mid-January. The rupee dropped 16% in 2018 and was one of the worst-performing currencies in Asia.
Foreign investors sold a net 10.8 billion rupees worth of government securities in the week ended May 8, extending net foreign outflow to 20.8 billion rupees so far this year, central bank data showed. Investor sentiment was damaged at the end of last year when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved parliament.
The International Monetary Fund (IMF) on Tuesday approved the disbursal of a $164 million tranche of a loan programme, bringing the total disbursed to more than $1.16 billion.
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