The Sri Lanka rupee weaker trend continued on Monday as the currency opened sharply lower against the US dollar. Dealers noted renewed pressure across the spot market, with rising bond yields adding to broader financial market tensions.
Fresh data shows the Sri Lanka rupee under pressure as bond yields edge higher
Sri Lanka’s currency market began the week on a softer note as the rupee slipped further against the US dollar, reflecting persistent volatility and market unease. On Monday, the rupee opened at 308.20/50 in the spot market, marking a notable depreciation from Friday’s 308.00/20 level. This continues a pattern of mild but steady weakening, as the currency was recorded at 307.80/95 just a week earlier. Market participants suggested that ongoing external pressures, modest importer demand, and cautious sentiment among traders contributed to this downward move.
Currency dealers observed that trading remained thin during early hours, with limited enthusiasm among buyers as investors evaluated global dollar strength and regional currency movements. The gradual slide of the local currency has drawn attention from both domestic businesses and international observers, who monitor exchange-rate movements to assess broader economic signals. While the drop is not extreme in absolute terms, the steady nature of the decline has raised questions about short-term market stability.
Simultaneously, Sri Lanka’s government securities market saw bond yields edge higher across several maturities. A bond maturing on 15 March 2028 traded at 9.15/25 percent, rising from the previous 9.12/18 percent. The uptick in yields suggests that investors are seeking slightly higher returns amid a backdrop of rising uncertainty. Analysts noted that small yield increases can reflect subtle shifts in expectations regarding inflation, liquidity conditions, or upcoming monetary policy decisions.
The adjustment was not isolated to shorter-term maturities. The 15 December 2029 bond rose to 9.55/70 percent from 9.50/55 percent, indicating increased demand for risk premiums on medium-term government debt. Similarly, the 01 July 2030 bond moved to 9.60/70 percent, expanding from the earlier 9.55/65 percent. These incremental changes may appear modest, but they form part of a broader pattern suggesting cautious investor positioning.
Longer-term maturities also reflected the upward momentum. The 15 March 2031 bond was quoted at 9.90/10.00 percent, slightly up from 9.90/95 percent, marking another small shift in market sentiment. Meanwhile, the 01 November 2033 bond saw yields climbing to 10.45/55 percent from 10.40/50 percent. This move crossed the psychological 10.50 percent threshold on the upper quote, a sign that some investors are building in expectations of possible policy adjustments or future market volatility.
Foreign exchange telegraphic transfer (TT) rates further illustrated the movement across key currencies. The US dollar was quoted at 304.5000 buying and 311.5000 selling, demonstrating both the spread and the currency board’s indicative range for commercial transactions. The British pound stood at 402.1534 buying and 413.5152 selling, while the euro traded at 351.1837 buying and 362.5469 selling. These values underscore the broader positioning of the rupee against global currencies, shaped by international market flows and domestic demand.
While the currency and bond markets reflected cautious sentiment, the Colombo Stock Exchange also experienced a sharp downturn. The All Share Price Index (ASPI) fell 2.84 percent, shedding 644.04 points to close at 22,068.78. Investor sentiment appeared subdued, with market participants reassessing risk exposure amid global economic headwinds and local currency fluctuations. The decline in the S&P SL20, which dropped 2.63 percent or 164.55 points to 6,102.48, confirmed the broader sell-off across blue-chip counters.
Market strategists indicated that equity investors may be reacting to the dual pressure of a weakening currency and rising bond yields, which can increase the cost of capital and influence corporate profitability. Furthermore, concerns surrounding external financing conditions and global monetary tightening cycles have continued to shape investor behavior. Many expect that the immediate outlook for equities will remain closely tied to currency performance and bond market signals, making the Sri Lanka rupee weaker trend an important factor to watch.
Despite these challenges, some analysts argue that volatility may present opportunities for selective investment, particularly for long-term investors who believe market fundamentals will eventually stabilize. They highlight that Sri Lanka’s ongoing economic adjustments, structural reforms, and improving fiscal discipline may support stronger medium-term outcomes, though near-term fluctuations are likely to persist.
As the week progresses, all eyes will remain on both the foreign exchange market and bond yields, as traders monitor how the rupee behaves under shifting global conditions. Whether the currency stabilizes or comes under further pressure will depend on a mix of external influences, including global dollar movements, regional market performance, and domestic economic data releases.