Sri Lanka rupee opens weaker in early Monday trading, hitting 309.55/65 to the US dollar, as the market reacts to ongoing liquidity management and selective convertibility policies. Bond yields, however, remain broadly steady across key maturities.
Sri Lanka rupee opens weaker as bond yields remain steady, reflecting market trends and investor caution
The Sri Lanka rupee opens weaker at 309.55/65 against the US dollar in the spot market on Monday, slightly depreciating from Friday’s close of 309.50/60, market dealers reported. Despite the rupee’s mild decline, government bond yields remained relatively stable, reflecting cautious investor sentiment amid ongoing monetary interventions and market volatility.
Sri Lanka’s currency has seen a gradual depreciation since December 2024, falling from around 292 per dollar to the current levels. This decline has occurred despite record current account surpluses and narrowing fiscal deficits, as the Central Bank adopted selective convertibility restrictions for private importers while actively buying foreign currency and managing domestic liquidity. Analysts note that these measures aim to stabilise reserves while preventing excessive speculation in the foreign exchange market.
The bond market showed marginal movement across key maturities. A bond maturing on 15 October 2029 was quoted at 9.49/55 percent, while the 15 December 2029 bond remained flat at 9.55/60 percent. Longer-dated instruments, such as the 15 March 2031 bond, traded slightly lower at 9.85/95 percent from a previous 9.90/95 percent. Bonds maturing in 2032 and 2033 maintained steady yields between 10.25 percent and 10.50 percent, and a 15 June 2035 bond was quoted at 9.62/70 percent.
Telegraphic transfer rates for major currencies reflected mixed movements. The US dollar was quoted at 306.00 buying and 313.00 selling, the British pound at 408.95 buying and 420.31 selling, and the euro at 356.33 buying and 367.69 selling. Dealers noted that demand for hard currency remains robust due to import needs and external debt obligations, influencing the rupee’s slight depreciation.
On the domestic equity front, the Colombo Stock Exchange (CSE) showed modest gains. The All Share Price Index (ASPI) increased by 0.06 percent, or 12.90 points, to 22,161, while the S&P SL20 index rose 0.38 percent, or 23.16 points, to 6,079. Market analysts attribute these gains to positive sentiment in blue-chip stocks and steady foreign inflows, though volatility persists amid currency pressures.
Financial experts suggest that the combination of a slightly weaker rupee and stable bond yields reflects a balancing act by the Central Bank. By allowing controlled depreciation, the authorities aim to maintain export competitiveness while ensuring that longer-term government securities remain attractive to both domestic and foreign investors.
“The rupee’s mild weakening is in line with market expectations, given the liquidity management measures and selective convertibility imposed by the Central Bank,” said a senior dealer at a local commercial bank. “Investors continue to monitor bond yields closely, but the market appears comfortable with the current stability in the debt segment.”
Sri Lanka’s broader macroeconomic environment also plays a crucial role. Despite pressures from currency fluctuations, the country’s economic fundamentals—including fiscal discipline and external balance—help anchor market confidence. Analysts believe that ongoing monitoring of reserve levels, import financing, and debt servicing obligations will determine the rupee’s trajectory in the coming weeks.
The financial community is particularly attentive to developments in the foreign exchange market, given the rupee’s central role in trade and investment flows. Any significant volatility could impact import-dependent sectors, corporate earnings, and inflation expectations. The Central Bank’s policy measures, therefore, aim to ensure gradual and orderly adjustments in the currency while supporting market liquidity.
In summary, the Sri Lanka rupee opens weaker, reflecting minor depreciation amid stable bond yields, as market participants weigh monetary interventions, liquidity dynamics, and ongoing fiscal policies. With equity indices showing modest gains, investors remain cautiously optimistic, balancing potential risks against opportunities in both the currency and debt markets.