USD/LKR Outlook: Slightly positive, but likely to move sideways, as the rate is just above its recent average with limited current drivers.
Key drivers:
- Rate gap: The Federal Reserve is expected to cut rates, while the Central Bank of Sri Lanka faces pressure to maintain currency stability amidst depreciation.
- Risk/commodities: The oil market is stable, aiding the US dollar; fluctuations in global oil prices can influence the currencies’ exchange rates.
- One macro factor: Predictions indicate the LKR may hold a range against the USD, influenced by increasing import demand and tourism performance.
Range: The USD/LKR rate is likely to drift within its recent range, maintaining stability as it encounters limited volatility.
What could change it:
- Upside risk: A stronger-than-expected core PCE report could elevate the USD, prompting a larger rate increase.
- Downside risk: Additional political tensions or tariff changes could pressure the USD and result in a weakening of the LKR.
