The USD to LKR exchange rate has recently shown notable movements, with the dollar trading at 90-day highs near 301.6 LKR, representing a slight increase of 0.6% above its three-month average of 299.9. Analysts observe that the market has remained relatively stable, fluctuating within a tight range from 298.3 to 301.6 LKR.
Recently, the US dollar has gained strength, bolstered by positive retail sales data and a recovery in consumer sentiment. This recovery comes in the wake of speculation regarding the Federal Reserve's leadership, which the markets have watched closely. The dollar's appreciation is supported by its status as a safe-haven currency, which tends to strengthen in times of economic uncertainty or geopolitical tensions, such as the ongoing issues related to the Ukraine crisis and fluctuating oil prices.
In contrast, the Sri Lankan rupee has faced significant challenges. The imposition of a 44% tariff rate on Sri Lankan goods by the US, as part of a broader trade conflict, adds strain to the local currency. Additionally, ongoing political unrest and declining tourist income have exacerbated the pressure on the LKR, which was already struggling due to reduced foreign reserves.
Economists suggest that the outlook for the LKR remains precarious given these circumstances. The combination of adverse trade relations with major partners and the internal political landscape may continue to hinder the rupee's performance against the USD. As the dollar maintains its dominant position driven by strong economic indicators and global market stability, the LKR's recovery seems uncertain in the near term.