The USD to LKR exchange rate has recently reached its 90-day highs, trading at approximately 309.6 LKR, which is 1.4% above its three-month average of 305.3 LKR. This upward movement follows a generally stable trading range of 2.8% between 301.3 and 309.6 LKR, indicating a level of volatility but within a controlled spectrum.
Recent insights from analysts highlight that the US dollar is experiencing downward pressure primarily due to expectations of aggressive monetary easing by the Federal Reserve as early as 2026. Following a soft consumer price index report that showed inflation falling to 2.7% in November, traders have begun to price in potential rate cuts. This shift in sentiment is expected to weaken the dollar further, with analysts warning that slowing US economic growth—coupled with a resilient labor market—adds complexity to the outlook. The US Dollar Index (DXY) has also pulled back from its recent highs, with market expectations tilting toward a dovish Federal Reserve stance.
In contrast, the Sri Lankan rupee is facing its own set of challenges and opportunities. The Central Bank of Sri Lanka maintained its interest rate at 7.75% amidst ongoing economic reforms and efforts to secure further International Monetary Fund (IMF) support. While Sri Lanka boasts a notable current account surplus, the rupee has depreciated by 4.1% against the dollar this year, which has increased import costs and domestic prices. Analysts suggest that the LKR's stability could rely heavily on the successful implementation of economic reforms aimed at meeting IMF requirements and attracting foreign investments.
Given the current landscape, experts predict that if the Federal Reserve signals a faster pace of rate cuts, the dollar could weaken further, potentially benefiting the LKR in the medium term. Moreover, if geopolitical tensions ease, the safe-haven appeal of the USD might diminish, providing further support for emerging currencies like the LKR. Traders should remain attentive to upcoming economic data releases, particularly from the US, as these could influence USD movements and, consequently, the USD to LKR exchange rate.
