Rupee weakens on downgrades

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By Paneetha Ameresekere

The market “spot” which was unchanged for two consecutive market days to Rs 325/335 to the US dollar in two-way quotes up to last Tuesday (12 April) which was the last working day prior to yesterday, closed weaker by Rs five (1.52-1.47 per cent) to Rs 330/340 to the dollar in two-way quotes in interbank foreign exchange (FX) trading after rating agencies downgraded Sri Lanka last week, market sources told Finance Today. 

This weakening also followed on the back of Sri Lanka making a statement last Tuesday, saying that Sri Lanka will not be honouring its foreign debt commitments until further notice, except commitments made to multilateral agencies and domestic parties due to an FX liquidity crunch.

Consequently, two international rating agencies, Fitch and S&P, downgraded Sri Lanka last Wednesday (13 April), from “CC” to “C” and from “CCC” to “CC” respectively. 

 “Spot” trades are settled after two market days from the date of transaction.