Foreign investors bought a net Rs 71.7 billion (US$216.7 million) worth of Sri Lanka rupee bonds over eight consecutive weeks through August 7, Central Bank data show, as the rupee steadied.
In the week ending August 7 alone, foreign investors purchased a net Rs 4,036 million (US$12.2 million at Rs 330 to the dollar), extending buying in government securities that began on June 19.
Holdings at a data-series high
The inflows lifted foreign holdings of rupee bonds to Rs 192.9 billion — the highest figure the Central Bank has published in its Weekly Economic Indicators.
A Central Bank official cautioned that this may not represent an all-time record, as the figure moves daily through the week with economic volatility.
Currency backdrop
Analysts attributed the net inflows to the rupee beginning to stabilise. The currency’s selling rate had fallen to a near three-year low of Rs 354 against the US dollar on May 21 before recovering to the Rs 340 level.
The rupee had held steady for more than three years before the sharp depreciation in May, which the Central Bank attributed to higher oil and vehicle imports amid the continuing conflict in the Middle East. The currency has fallen 7.6 percent through August 7 this year.
Sri Lanka has recorded total inflows of around Rs 51.5 billion into rupee bonds so far this year, following a net inflow of Rs 71.5 billion last year. Foreign holdings had earlier reached a near three-year high in July.
Analysts said deflationary policies in previous years supported inflows amid curtailed imports, though inflation has picked up over the last three months following a near 50 percent rise in fuel prices. Globally, investors remain cautious on growth because of the latest Middle East escalation.
