The USD to LKR exchange rate has recently seen notable movements, influenced by both US monetary policy dynamics and Sri Lankan economic challenges. As of the latest data, the USD has risen to 90-day highs near 304.8 LKR, a mere 0.9% above its three-month average of 302.1 LKR. This strength reflects a stable trading range between 296.7 and 304.8 LKR.
Analysts suggest that the US dollar is benefitting from a hawkish shift in Federal Reserve interest rate expectations. Although the Fed's recent decision included a rate cut, Chair Jerome Powell indicated that further cuts are not guaranteed, which has bolstered investor confidence. Market participants are closely monitoring upcoming speeches from Fed policymakers for potential insights that could drive the dollar higher.
On the other hand, the Sri Lankan rupee faces pressures despite a record current account surplus of $1.495 billion. The LKR has experienced depreciation since February, raising concerns over domestic liquidity and central bank policies. The Central Bank of Sri Lanka has maintained its overnight policy rate at 7.75% to support economic growth, especially ahead of the 2026 budget and an imminent IMF review.
Economists predict that while the World Bank projects moderate growth for Sri Lanka's economy at 4.6% in 2025, the need for structural reforms and efficient public spending remains critical for long-term stability. Such challenges may keep downward pressure on the LKR as the market weighs economic recovery against ongoing fiscal difficulties.
In summary, the USD is positioned strongly against the LKR, aided by US monetary policy stability and expectations of further action from the Fed. Meanwhile, the LKR's depreciation reflects underlying economic vulnerabilities, which need addressing to bolster confidence in the currency.
