The Sri Lanka rupee weakened marginally in Thursday’s spot market as government bond yields eased across several shorter and mid-tenor maturities, reflecting cautious sentiment among currency traders and fixed-income investors amid recent market volatility.
Sri Lanka rupee slips against dollar as shorter-term yields edge lower
The Sri Lanka rupee continued its recent softening trend on Thursday, trading slightly weaker against the US dollar in the spot market, while domestic government bond yields edged lower, particularly across shorter and medium tenors. Market participants attributed the movement to ongoing adjustments in foreign exchange flows and expectations surrounding monetary and fiscal conditions.
Currency dealers quoted the Sri Lanka rupee at 309.70/85 per US dollar, compared with 309.72/80 in the previous session. Although the movement was marginal, it reinforced the broader depreciation seen in recent weeks, suggesting that the local currency remains under mild pressure despite relative stability in external conditions.
Traders noted that demand for dollars remained steady, while inflows were insufficient to provide strong near-term support for the rupee. The gradual weakening has been closely watched by importers and investors, particularly as Sri Lanka continues to manage external financing needs and balance foreign exchange reserves.
In the domestic bond market, yields softened slightly on several benchmarks, reflecting renewed interest in shorter-dated securities. A government bond maturing on 15 February 2028 was quoted at 9.00/9.05 percent, while the 1 July 2028 maturity traded at 9.10/9.14 percent. These levels suggested modest demand, as investors appeared comfortable locking in returns amid expectations of relatively stable interest rates.
Yields on longer maturities also showed small adjustments. Bonds maturing on 15 September 2029 were quoted at 9.58/9.60 percent, while the 15 December 2029 maturity edged down to 9.60/9.65 percent from 9.64/9.67 percent previously. The bond maturing on 1 March 2030 traded at 9.67/9.70 percent, indicating limited volatility across the curve.
Further along the yield spectrum, the 15 March 2031 bond was quoted at 9.90/10.00 percent, slightly lower than the previous session’s upper range. Longer-dated securities showed minimal movement, with the 15 December 2032 maturity quoted at 10.35/10.40 percent and the 15 June 2035 bond at 11.02/11.05 percent, marginally below earlier levels.
Market analysts said the easing in yields reflected cautious optimism among investors, as inflation expectations remain contained and monetary policy signals point toward stability rather than tightening. However, they also cautioned that sentiment remains sensitive to external developments, including global interest rate trends and capital flow dynamics.
In the broader foreign exchange market, telegraphic transfer rates indicated mixed movements among major currencies. The US dollar was quoted at 306.2500 buying and 313.2500 selling, while the British pound traded at 410.3615 buying and 421.6797 selling. The euro was quoted at 355.6795 buying and 367.0677 selling, reflecting continued fluctuations against the rupee.
Equity markets showed modest gains, offering a degree of balance to the day’s financial indicators. The All Share Price Index rose 0.17 percent, gaining 40.27 points to close at 23,846. Meanwhile, the S&P SL20 index edged up 0.01 percent, adding 0.90 points to finish at 6,620.
Despite the slight uptick in equities, analysts noted that investor sentiment remains selective, with participants closely tracking macroeconomic signals, fiscal developments, and currency movements. The interplay between the Sri Lanka rupee, bond yields, and equity performance continues to serve as a key barometer of confidence in the domestic financial system.
Overall, the day’s trading highlighted a market in consolidation mode, with incremental shifts rather than sharp movements. As Sri Lanka navigates ongoing economic adjustments, traders and investors are likely to remain cautious, responding quickly to policy signals and global developments that could influence currency stability and interest rate expectations.