📈 Rupee Strengthens as CBSL Intervenes to Calm Forex Market

The Sri Lankan Rupee appreciated yesterday after the Central Bank of Sri Lanka (CBSL) moved to stabilize a sentiment-driven foreign exchange market, which faced sharp depreciation earlier in the week due to panic dollar demand. • Overall Figures: The interbank USD spot buy/sell rate eased to Rs. 329/335, recovering from Thursday’s peak weakness of Rs. 331/348. However, the currency remains weaker compared to last week's close of Rs. 321.90/326.00. • Key Interventions: CBSL informally instructed banks to cap the interbank spot exchange rate at Rs. 330. Speculation also arose regarding a potential regulatory reduction in the mandatory export proceeds conversion period from 90 days to 30 days. • Market Dynamics: The initial volatility was driven by importers front-loading Letters of Credit (LCs) and exporters delaying dollar conversions. Following CBSL’s cues, exporter dollar sales resumed, restoring market liquidity, while importers stepped back to the sidelines. • Economic Context: Devaluation pressures were linked to global energy prices and Middle East tensions. However, IMF Mission Chief Evan Papageorgiou expressed confidence in Sri Lanka's stronger policy framework, improved reserves, and ongoing reforms to absorb these external shocks.