The USD to LKR exchange rate remains under pressure as expectations of Federal Reserve interest rate cuts intensify. As of recent updates, the US dollar is experiencing weakness, pushed lower by market forecasts that suggest aggressive rate reductions could start as soon as March-June 2026. Mixed economic data from the US shows a softening growth trend, particularly in manufacturing and consumer spending, although a robust labor market is providing some support. Analysts note that a dovish Fed stance erodes the relative yield advantage of the dollar, leading to a decrease in demand.
The current USD to LKR rate stands at 308.3, reflecting a 1.3% increase over the three-month average of 304.2, yet the currency pair has remained stable within a narrow range of 301.0 to 308.9. This stability is amid fluctuating global risk sentiments and the positive performance of other major currencies, such as the Euro and the British Pound, which have recently strengthened against the dollar due to Fed rate cut expectations.
In Sri Lanka, the Central Bank held the interest rate at 7.75% amid ongoing economic reforms aimed at meeting IMF targets. This decision aligns with the need for fiscal stability and attracting foreign investment, essential for prevailing economic recovery. Although Sri Lanka's current account has shown a surplus, the rupee has depreciated by 4.1% against the dollar this year, indicating rising import costs that could further pressure the currency.
Looking forward, both the US and Sri Lankan economic indicators will play a critical role in determining the USD to LKR exchange rate. Upcoming consumer price index data from the US could provide additional direction, while the potential release of funds from the IMF for Sri Lanka may bolster confidence in the LKR. Experts suggest the dollar's weakness, driven by rate cut expectations and geopolitical factors, could continue to affect the exchange rate dynamics in the near term.
