Tuesday May 26, 2026
Tuesday May 26, 2026
Tuesday, 26 May 2026 05:18 - - {{hitsCtrl.values.hits}}
The rupee strengthened against the US dollar for the second consecutive session yesterday.
The buy/sell LKR/USD interbank spot contracts closed at Rs. 325.50/Rs. 327.00 as against Friday’s closing of Rs. 329.00/Rs. 335.00. The spot market buy/sell rate eased on Friday from Thursday’s Rs. 331/Rs. 348 level, which marked the currency’s weakest level against the dollar last week, after the Central Bank of Sri Lanka (CBSL) used moral suasion to calm a panicking market.
The indicative telegraphic transfer LKR/USD exchange rate eased to Rs. 326.01/Rs. 336.42 yesterday from Thursday’s Rs. 342.63/Rs. 354.03 levels.
Frontier Research said yesterday that the Sri Lankan rupee has been unstable over the past week, after depreciating and then appreciating at a considerable pace.
“However, neighbouring countries too have been encountering similar movements, which implies the strong impact of the prevalent energy crisis and global uncertainty, which is essentially an external hit on these economies,” the research firm said.
“Even though this makes it challenging to determine the impact in general on Sri Lanka’s external sector in the short term, the existing external buffers both in terms of the current account surplus in the Balance of Payments and net foreign assets of the banking system should help the country weather some of these shocks that come its way,” it noted.
The Indonesian Rupiah fell and reached a record low of 17,658 against the US dollar this week, amid pre-existing pressure driven by growing investor concerns over Indonesia’s fiscal position and governance framework.
The Indian rupee has emerged as the worst-performing currency in emerging Asia, declining by over 6% year-to-date (YTD), while foreign investors have withdrawn more than $ 20 billion from Indian equities since the onset of the war, with cumulative outflows already surpassing last year’s record levels.
The Thai Baht has also underperformed YTD, declining by 2.72%, as energy price shocks and mounting fiscal concerns have further intensified downward pressure on the currency.
“These economies are especially vulnerable as oil-importing nations facing simultaneous capital outflows, with investors reallocating funds elsewhere, while shifting expectations of a hike in US interest rates this year have added further downward pressure. By contrast, bullish sentiments have strengthened towards the Singapore dollar and the Malaysian ringgit, reflecting the Singapore Central Bank’s safe-haven status and Malaysia’s role as a net energy exporter,” Frontier Research said.
BMI sees rupee strengthening, renewed BOP crisis unlikely
The Sri Lankan rupee is set to recover from its slide by the end of this year as oil prices are set to decline and as the Central Bank of Sri Lanka (CBSL) raises interest rates, according to BMI, a Fitch Solutions company.
“A renewed Balance of Payments (BOP) crisis is unlikely, which limits the risk of a sharp depreciation in the currency,” said Singapore-based BMI Country Risk Analyst Carolyn Pang. “The currency will rebound to Rs. 320 per dollar by year-end, an over 3% gain from Monday’s level, as the Iran war is likely to end by June,” she said.
CBSL warns against misleading narratives on money printing and exchange rate
The Central Bank of Sri Lanka (CBSL) yesterday issued a public advisory cautioning citizens against being misled by inaccurate and oversimplified narratives surrounding monetary policy, money printing, and exchange rate determination amid heightened public debate over recent rupee volatility.
In a social media post titled ‘Do Not Be Deceived!,’ the CBSL said matters relating to currency issuance, money supply management, and exchange rate determination involved complex economic mechanisms requiring specialised technical expertise to properly analyse and understand.
The CBSL said the public should remain vigilant against “superficial and inaccurate narratives” currently circulating regarding core economic policies.
“The printing of currency, management of the national money supply, and the determination of foreign exchange rates are highly technical matters,” the CBSL said, stressing that such issues required careful analysis grounded in technical and economic understanding.
The advisory comes against the backdrop of intensified public debate over the recent depreciation of the rupee following external pressures linked to the Middle East conflict, rising global oil prices, and increased demand for US dollars in the domestic market.
CBSL data showed the rupee’s year-to-date (YTD) depreciation accelerating from 4.5% by 15 May to 7.2% by 22 May, marking the sharpest deterioration in the currency so far this year amid heightened market anxiety over the Middle East conflict and rising global energy prices.
Dealers said the rupee came under pressure after importers front-loaded Letters of Credit (LCs) and foreign currency bookings amid expectations of further depreciation, while exporters delayed conversions anticipating higher exchange rates, tightening dollar liquidity in the domestic market.
By Friday, with CBSL moral suasion, sanity was restored and the Sri Lankan rupee became the best-performing currency is Asia.
