USD/LKR Outlook:
The USD to LKR rate is currently below its recent average and near its recent lows, indicating a bearish outlook. Recent economic data from the US and the strengthening of the Sri Lankan economy are contributing to the downward pressure.
Key drivers:
• Rate gap: The Federal Reserve's cautious approach towards interest rate cuts contrasts with the Sri Lankan Central Bank's positive inflation goals.
• Risk/commodities: The decline in oil prices is supporting the Sri Lankan Rupee, easing inflationary pressures domestically.
• One macro factor: Ongoing debt restructuring agreements in Sri Lanka are aiming to bolster investor confidence but remain a challenge for exchange stability.
Range:
USD/LKR is likely to hold within its recent range, as stability prevails despite pressures.
What could change it:
• Upside risk: Stronger-than-expected US economic indicators could support a bounce back for the USD.
• Downside risk: A substantial increase in US jobless claims may further weaken the USD.
