Sri Lanka rupee opened firmer on Friday as the currency recovered modestly after weeks of depreciation, while bond yields and equity markets showed limited movement. Dealers said the calmer tone reflected balanced market conditions rather than a sharp shift in sentiment.
Sri Lanka rupee strengthens while bond yields and stocks remain steady
Sri Lanka rupee showed early signs of stability on Friday, opening slightly stronger against the US dollar even as government bond yields and stock market indices remained broadly steady. Currency dealers said the marginal appreciation suggested a pause in recent depreciation pressures, supported by balanced demand in the foreign exchange market.
In spot trading, the rupee was quoted at 309.10/20 to the US dollar, improving from the previous day’s closing levels of 309.58/63. The movement marks a modest recovery after the local currency had weakened over several sessions, reflecting cautious sentiment among importers and market participants.
Market observers noted that the firmer opening did not indicate aggressive buying or selling pressure, but rather a gradual adjustment following recent volatility. The Sri Lanka rupee has remained sensitive to dollar demand from trade-related activity, while broader macroeconomic conditions continue to shape currency expectations.
In the domestic bond market, yields were largely unchanged, with slight easing seen in some maturities. A government bond maturing on December 15, 2029 was quoted at yields between 9.59 and 9.64 percent, marginally lower than the previous range of 9.65 to 9.70 percent. This small decline suggested steady demand for mid-tenor securities.
The bond maturing on March 1, 2030 was quoted at 9.68 to 9.72 percent, showing little change from earlier levels. Meanwhile, a longer-dated bond maturing on July 1, 2030 traded around 9.70 to 9.80 percent, slightly lower than the prior session’s upper range.
Longer-term maturities also reflected stability rather than directional movement. A bond maturing on December 15, 2032 was quoted at yields between 10.30 and 10.35 percent, compared with the previous 10.28 to 10.38 percent. A bond maturing on June 15, 2034 was quoted at 10.80 to 10.90 percent, indicating steady investor appetite despite ongoing fiscal and monetary considerations.
Analysts say the relatively flat yield curve suggests that investors are comfortable with the current interest rate environment, particularly after recent signals from the Central Bank indicating policy continuity. Stable bond yields often help support the Sri Lanka rupee by limiting sudden capital flow shifts and anchoring expectations in financial markets.
Foreign exchange retail rates also reflected stable conditions. Telegraphic transfer rates for the US dollar were quoted at 305.95 rupees for buying and 312.95 rupees for selling. The British pound traded at 420.33 buying and 431.82 selling, while the euro was quoted at 362.74 buying and 374.29 selling.
Currency traders said these levels indicate steady interbank liquidity and limited speculative activity. The Sri Lanka rupee’s modest strengthening was seen as consistent with ongoing reserve management efforts and balanced foreign currency inflows, rather than a reaction to a specific policy announcement.
Equity markets mirrored the subdued tone seen in currency and bond markets. On the Colombo Stock Exchange, the All Share Price Index rose marginally by 0.06 percent, or 15.05 points, to close at 23,915. The S&P SL20 Index also edged higher, gaining 0.09 percent, or 5.92 points, to end at 6,649.
Market participants described the equity gains as incremental rather than momentum-driven, reflecting selective buying in blue-chip counters amid cautious investor sentiment. Trading volumes remained moderate, suggesting that investors are awaiting clearer signals on economic growth, interest rates, and external sector developments.
Economists note that movements in the Sri Lanka rupee, bond yields, and equities increasingly reflect a phase of consolidation rather than sharp swings. Improved macroeconomic stability, gradual reserve accumulation, and steady policy guidance have helped reduce volatility, even as external risks and global market trends continue to influence sentiment.
Looking ahead, traders expect the currency to remain range-bound in the near term, with incremental movements driven by importer demand, export inflows, and broader regional currency trends. Any sustained strengthening of the rupee would likely depend on continued external inflows and confidence in macroeconomic management.
For now, Friday’s trading session pointed to calmer market conditions, with the Sri Lanka rupee gaining modest ground while financial markets showed signs of stability rather than stress.