USD/LKR Outlook:
Slightly positive, but likely to move sideways, as the USD is near its 90-day average and lacks a clear driver.
Key drivers:
• Rate gap: The Federal Reserve's decision to maintain rates steady contrasts with the Central Bank of Sri Lanka's flexible approach, which could lead to further depreciation of the LKR.
• Risk/commodities: Oil prices have been relatively stable, reducing immediate pressure on the LKR, which is sensitive to fuel import costs.
• One macro factor: Sri Lanka's recent dollar purchases by its central bank have impacted liquidity, contributing to the rupee's depreciation.
Range:
USD/LKR is expected to hold within its recent stable range as market conditions are relatively balanced.
What could change it:
• Upside risk: A stronger-than-expected US jobs report could boost the USD against the LKR.
• Downside risk: Escalation of geopolitical tensions affecting trade could further weaken the USD through reduced investment.
