Bias: bullish-to-range-bound, because USD/LKR sits above its 90-day average and is in the upper half of the three-month range.
Key drivers:
- Rate gap: The US Federal Reserve is expected to ease toward a neutral stance in 2026, while Sri Lanka's central bank policy remains cautious; narrowing the rate gap may cap USD gains.
- Macro factor: US geopolitical tensions and tariff uncertainty inject a risk element into USD moves.
- Risk/commodities: Oil trends have been subdued, keeping external financing pressures in check and limiting major USD spikes.
Range: Range: Expect the pair to drift within the three-month range, with a possible test near the upper end but no breakout.
What could change it:
- Upside risk: a stronger US data print or a hawkish Fed tilt (policy leaning toward higher rates) could push the dollar higher against the LKR.
- Downside risk: clear signs of Sri Lankan policy support or faster Fed easing could soften dollar strength and help the rupee.
