The Sri Lanka rupee remained stable against the US dollar on Friday, showing signs of resilience, while government bond yields on shorter tenors recorded a mild decline, according to market dealers.
Sri Lanka rupee shows stability against the US dollar as shorter-term bond yields edge lower.
The Sri Lanka rupee traded in a narrow range on Friday, quoted at 303.50/70 against the US dollar, marking a slight improvement from Thursday’s level of 303.65/75. Dealers said the local currency displayed modest resilience, supported by improved dollar inflows and a cautious outlook among traders ahead of month-end settlements.
Currency traders noted that the Central Bank of Sri Lanka maintained its steady presence in the market to prevent excessive volatility. While no major interventions were reported, the bank’s policy stance continues to favor exchange rate stability, ensuring a controlled pace of currency adjustments.
The local forex market has been relatively calm in recent weeks, with commercial banks maintaining balanced demand and supply positions. Importers have been selectively entering the market, while exporters are said to be releasing proceeds in phases to take advantage of favorable rates. This behavior has kept the rupee’s trading band tight and prevented sharp fluctuations that were seen earlier in the year.
On the government securities side, bond yields in the secondary market saw slight easing, particularly on shorter tenors, as investors responded to stable inflation expectations and improved market sentiment. Dealers reported a softening of yields on bonds maturing between 2028 and 2029.
A bond maturing on March 15, 2028, was quoted at 9.18/22 percent, while the July 1, 2028 bond traded at 9.23/27 percent, down marginally from the previous day’s 9.23/28 percent. The yield on the September 15, 2029 bond stood at 9.69/71 percent, indicating mild investor confidence in medium-term securities.
Longer-tenor bonds, however, saw limited movement. A July 1, 2030 bond was quoted at 9.78/82 percent, while the October 1, 2032 issue traded slightly higher at 10.55/65 percent, reflecting investor caution over long-term risks and expectations of gradual monetary tightening.
Market participants said the trend of softening yields in shorter durations could continue if inflation remains within the Central Bank’s target range and fiscal reforms progress as planned. “The appetite for shorter bonds has increased as investors anticipate stable returns with lower risk,” a fixed-income dealer commented.
Analysts added that the rupee’s performance over the coming weeks will depend largely on external debt servicing commitments, tourism inflows, and remittance growth. The country’s recent progress in debt restructuring talks has also boosted sentiment, helping to reduce immediate pressure on the local currency.
Meanwhile, global factors such as oil price movements and US Federal Reserve policy signals continue to play a crucial role in shaping local forex and bond dynamics. A stronger dollar globally could add mild depreciation pressure, but Sri Lanka’s improving reserves position offers a buffer against sharp declines.
Looking ahead, traders expect the rupee to hover around the current band unless there is an unexpected spike in import demand or external payments. “Stability is the key word for now,” one currency strategist noted. “The market seems to have priced in most short-term uncertainties, allowing the rupee to find its balance.”
With yields easing slightly and the exchange rate remaining steady, both the currency and bond markets appear to be entering a period of cautious optimism. For investors, shorter-term government securities continue to offer moderate yet stable returns, while the rupee’s steady path signals confidence in Sri Lanka’s near-term economic direction.