Bias: The USD/LKR is above the 90-day average and sits in the upper half of the last three months' range, producing a clear bullish-to-range-bound bias that traders are watching for signs of a sustained move, as external pressures stay elevated.
Key drivers:
Rate gap: The Fed is expected to cut policy rates toward a neutral stance in 2026, keeping the USD supported against the LKR as Sri Lanka's policy remains cautious.
Macro factor: Upcoming US non-farm payrolls and unemployment data could influence Fed easing bets and USD strength. Markets will also watch domestic inflation.
Range: The pair is likely to hold within the recent range, with a drift toward the upper end if US data stay firm, and traders will watch policy guidance.
What could change it:
Upside risk: A hotter US payrolls print or hawkish Fed rhetoric that delays rate cuts, lifting the dollar.
Downside risk: Softer US data or signals toward earlier easing, allowing the rupee to recover.
