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Bloomberg Comment – 04-12-2018

LKR May Weaken as Fitch Cuts Nation’s Rating: Inside Sri Lanka
2018-12-04 03:38:53.764 GMT
By Anusha Ondaatjie

(Bloomberg) — Sri Lanka’s rupee could extend declines after Fitch Ratings downgraded the nation’s rating amid a deepening political crisis.
* USD/LKR little changed at 178.85; pair has climbed 17% this year

* Fitch lowered Sri Lanka’s rating by one notch to B, five levels below investment grade, with a stable outlook

** Co. said ongoing political turmoil worsens nation’s external financing risks which are already under pressure due to tighter global monetary conditions

* “We’ve been getting one bad news after the other and with things extremely uncertain, most investors have cut off trading portfolios,” says Dimantha Mathew, head of research at First Capital

* NOTE: Sri Lanka’s Court of Appeal issued an interim order on Monday preventing newly appointed PM Mahinda Rajapaksa and his ministers from exercising powers until it hears a petition challenging their authority

* Overseas investors sold $0.1m of local stocks on Monday after $30.1m of net outflows in November, a fifth month of withdrawals: exchange data

* Yield on 11.5% govt bonds due May 2023 rose 3bps to 11.95% Monday