The recent performance of the USD to LKR exchange rate indicates significant developments in both US and Sri Lankan markets. As of early December 2025, the USD is trading at near 90-day highs around 309.6 LKR, approximately 1.4% higher than its three-month average of 305.4. Analysts note that the pair has displayed remarkable stability, moving within a tight range of 2.8% from 301.3 to 309.6 LKR.
The US dollar has softened recently, largely influenced by the unexpected decline in inflation rates, which dropped from 3% to 2.7% in November. Economists now anticipate that this may lead the Federal Reserve to implement aggressive rate cuts as early as mid-2026. Such expectations have triggered a broad weakening of the USD, which is compounded by mixed US economic data that reflects slowing growth alongside a resilient labor market. With risk-on sentiment prevailing in equity markets, the USD has further lost its appeal as a safe haven.
In contrast, the Sri Lankan rupee remains under pressure primarily due to domestic economic challenges. The Central Bank of Sri Lanka (CBSL) has maintained its policy interest rate at 7.75% as the country navigates fiscal reforms and an upcoming IMF review, which is crucial for accessing further funds. Although Sri Lanka has achieved a record current account surplus, the rupee has depreciated by 4.1% against the USD this year, raising concerns about import costs and inflationary pressures.
Experts suggest that the CBSL's accommodative monetary policy aims to bring inflation towards a targeted 5% by the third quarter of 2025, which could lead to further depreciation risks if not managed carefully. The combined outlook points to a weaker dollar due to expected Fed rate cuts and a moderately pressured rupee if economic reforms do not catalyze robust growth.
In summary, the USD to LKR exchange rate is likely to experience continued volatility influenced by external market dynamics and domestic economic reforms. Those looking to transact in this currency pair should remain vigilant regarding upcoming economic data from both the US and Sri Lanka, as well as the evolving geopolitical landscape, which could affect sentiment and performance.
