USD/LKR Outlook: Slightly positive, but likely to move sideways, as the rate is just above its recent average and lacks a clear supporting driver.
Key drivers:
- The Federal Reserve's decision to halt rate cuts has stabilized the US dollar's value, contributing positively against the Sri Lankan rupee.
- The Sri Lankan rupee has been under pressure due to a significant depreciation and the Central Bank's recent dollar purchases, which injected liquidity but did not stabilize the currency.
- Recent remarks from Sri Lanka's president regarding the need to capture export revenues highlight ongoing challenges to maintaining the rupee’s stability, reflecting broader economic concerns.
Range: The USD/LKR is expected to hold within its recent range, with fluctuations likely limited unless new factors emerge.
What could change it:
- Upside risk: A stronger economic indicator from the US, like a robust jobs report, could boost USD demand.
- Downside risk: If geopolitical tensions escalate significantly, it could prompt a flight to safe-haven assets, impacting the USD negatively.
