The USD to LKR exchange rate currently leans bearish, with the dollar under pressure.
Key drivers include a declining interest rate outlook for the US, as the Federal Reserve hints at more rate cuts by mid-2026. Additionally, the Sri Lankan Rupee has been weakened by a 4.1% depreciation against the dollar this year, exacerbated by economic challenges and the impact of Cyclone Ditwah on infrastructure. However, rising tourist arrivals and remittances provide some support to the LKR.
The near-term trading range may remain stable but is expected to bias slightly higher than recent averages.
An upside risk might emerge from improved US economic data that strengthens the dollar, while a downside risk includes persistent economic troubles in Sri Lanka that further depress the Rupee or a stronger global push away from the USD, especially in ASEAN markets.