The current outlook for the USD to LKR exchange rate reflects a mix of pressures impacting both currencies. Recently, the US dollar has been under pressure due to expectations of a dovish approach from the Federal Reserve, which is anticipated to cut interest rates. The ISM manufacturing PMI report indicated a deeper-than-expected contraction in the US manufacturing sector, further weighing on the USD's strength. As noted by experts, the focus is now shifting to a speech by Fed Chair Jerome Powell, which could potentially stabilize the dollar if he counters the dovish narrative.
In contrast, the Sri Lankan Rupee (LKR) has experienced a challenging start to the year. After a solid performance in 2024, the LKR faced a 1.7% depreciation against the USD in January 2025. The Central Bank of Sri Lanka has intervened by purchasing dollars from the market to support the LKR, aiming to mitigate depreciation pressures. Nevertheless, the Central Bank warns that without increased foreign inflows—especially from long-term direct investment—future pressures on the LKR could arise.
Market analysts note the LKR remains buoyed by a positive external sector outlook, with a current account projected to maintain a surplus driven by robust worker remittances and a rebound in tourism. However, ongoing dynamics, such as global competition for foreign investment and fluctuating import demands, continue to affect the LKR's stability.
Currently, the USD to LKR exchange rate is trading near 90-day highs at approximately 308.9, which is 1.6% above its three-month average of 304 and within a stable range of 301.0 to 308.9. This indicates that while the USD may face downward pressure, the LKR's future is equally uncertain as it navigates through local and global economic challenges. As highlighted by recent forecasts, monitoring these factors will be crucial for individuals and businesses engaged in international transactions.
