The Sri Lanka rupee opened slightly stronger against the US dollar on Thursday, signalling tentative stability after weeks of pressure, while government bond yields remained broadly unchanged amid cautious investor sentiment in domestic financial markets.
Sri Lanka rupee opens stronger while government bond yields remain stable
The Sri Lanka rupee showed marginal strength at the opening of Thursday’s spot market, offering a measured pause after several weeks of depreciation, as bond yields across key maturities remained largely steady. Market participants described the movement as technical rather than trend-defining, reflecting a balance between foreign exchange demand and cautious liquidity conditions.
In early trading, the domestic currency was quoted at 309.58/63 to the US dollar, improving slightly from the previous day’s closing levels of 309.60/67. While the movement was narrow, dealers noted that the stabilisation comes after sustained weakening driven by import demand, corporate dollar requirements, and intermittent exporter conversions.
Currency traders indicated that near-term direction for the rupee remains sensitive to liquidity management by the Central Bank of Sri Lanka, inflows related to trade settlements, and broader market expectations surrounding interest rate policy. Although the improvement was modest, it helped reinforce the perception that the currency is finding temporary support around current levels rather than entering a sharp downward phase.
Government securities markets mirrored this sense of calm, with bond yields remaining broadly unchanged across the yield curve. Trading activity was selective, with investors focusing on benchmark maturities while awaiting clearer signals from ongoing debt issuance and monetary operations.
A treasury bond maturing on December 15, 2029, was quoted at yields of 9.65 to 9.70 percent, unchanged from the previous close. The July 1, 2030 maturity traded at 9.75 to 9.80 percent, reflecting stable demand in the mid-tenor segment. Meanwhile, the March 15, 2031 bond saw yields edge slightly lower to 9.90 to 10.00 percent, easing from 9.95 to 10.00 percent, indicating mild buying interest.
Longer-dated securities also showed limited movement. Bonds maturing on December 15, 2032, were quoted at 10.28 to 10.38 percent, while the June 1, 2033 maturity traded at 10.65 to 10.75 percent. The June 15, 2035 bond was quoted at 10.95 to 11.05 percent, marginally softer than the previous close, suggesting selective positioning by investors with longer investment horizons.
Market attention was also focused on an ongoing treasury bond auction amounting to 205 billion rupees. Dealers said the auction outcome could provide further guidance on yield direction, particularly if demand signals comfort with current rate levels or reveals sensitivity to supply volumes. In recent weeks, auctions have played a key role in shaping secondary market sentiment as participants assess funding costs and liquidity absorption.
In the foreign exchange market, telegraphic transfer rates reflected steady demand for major currencies. The US dollar was quoted at 306.15 buying and 313.15 selling. The British pound traded at 421.6750 buying and 433.1666 selling, while the euro was quoted at 363.9511 buying and 375.4991 selling. These levels underscored persistent demand for hard currencies, particularly from importers and service-sector payments.
Equity markets showed a mildly positive tone alongside currency and bond stability. The Colombo Stock Exchange’s All Share Price Index rose 0.20 percent, gaining 47.81 points to close at 24,039. The more liquid S&P SL20 index advanced 0.25 percent, or 16.93 points, to 6,687. Analysts said gains were driven by selective buying in heavyweight counters rather than broad-based market momentum.
Overall, the modest strengthening of the Sri Lanka rupee, combined with stable bond yields and cautious equity gains, reflects a market in consolidation mode. Investors and dealers alike appear to be awaiting clearer macroeconomic cues, including fiscal developments, external inflows, and policy guidance, before committing to stronger directional positions.