The rupee appreciation during the past week will have a positive impact on the economy, an investment professional said.
“The depreciation of the rupee was negative to the economy. Now there is a correction with regard to the over depreciation of the rupee. The over depreciation of the rupee compared with the index has come to an end, and this is a positive sign for the economy,” former President, Stock Brokers Association of Sri Lanka (SBAS), Ravi Abeysuriya said. Sri Lanka’s rupee appreciated 1.88 percent in January 2019 to Rs. 181.28 against the US dollar. Overall, the rupee depreciated by 19 percent during 2018. The exchange rate as at December 31, 2018 was 184.69 (selling rate). It was the highest ever exchange rate recorded against the US dollar, by Lanka’s rupee. The rate has dropped by Rs. 4.50 to Rs. 180.19 as at January 31, this year.
“If we are able to move towards hundred rupees/dollar with regard to the basket of goods, not over valued or undervalued, industry confidence and investor interest will grow. The rupee depreciation is negative for any investor, the appreciation of the rupee as at present is a positive sign,” he said.
“The present trend of investment in the stock market will continue with the rise of investor confidence. The signs are positive all-round. We are heading in the right direction,” Abeysuriya said.
The Rating agencies which down-graded the country’s ratings, will re-evaluate again. With better rains and better harvests, the country will have improved living standards and more economic benefits, he said. The decision by the Central Bank to monitor and restrict the ‘hot money’ coming in to the country is a good move. It’s limit was 10 percent and has come down to 3.5 percent at present.
The uncertainty of foreign investors investing in Sri Lanka’s rupee debt instruments has been removed with this move. The five percent limit was too high and now it is at the correct level. This is an encouragement for investors, he said.
“This is good news and not adverse to the economy. We will not see that kind of development and money moving up in the future,” Abeysuriya said.