USD/LKR Outlook:
Bearish, as the rate is below its recent average and near recent lows, pressured by a decline in the US Dollar.
Key drivers:
• Rate gap: The Federal Reserve's decision to maintain interest rates reflects a cautious approach, contributing to USD's current decline.
• Risk/commodities: Oil prices are stable, limiting upward pressure on the USD and offering no support for the LKR.
• One macro factor: Sri Lanka's central bank has injected liquidity into the market through significant dollar purchases, leading to further depreciation of the LKR.
Range:
The USD to LKR is likely to drift within the recent 3-month range, potentially testing its lower extremes.
What could change it:
• Upside risk: A surprise uptick in US payroll figures could strengthen the USD.
• Downside risk: Increased tensions from US trade policies could further weaken the USD.
