Sri Lanka’s foreign exchange market was hamstrung on Friday with no active spot quotes for the rupee, as market participants said moral suasion had replicated conditions from past episodes of currency trouble driven by Central Bank liquidity injections.
EconomyNext reported that interventions were seen around Rs. 317.00 on Thursday and Rs. 317.75 later. The only market rate available was a one-month forward around Rs. 319.00/70 to the US dollar, implying a spot rate of around Rs. 318.10 — a step weaker than the Rs. 316.75/317.00 spot-next quoted a day earlier.
Market analysts attributed the tightness to aggressive Central Bank operations. They said the CBSL printed money through domestic buy-sell swaps and also bought dollars “ruthlessly” in February 2026 without running sufficient deflationary policy to mop up the new rupees. The operation, undertaken as Cyclone Ditwah slowed credit demand, signalled to exporters to sell dollars at depreciated rates while preventing appreciation.
“The hamstrung market replicates conditions seen in previous episodes of money printed by the central bank to keep rates down, and convertibility was denied,” EconomyNext said, describing how confidence “is killed and market is driven to panic with exporters holding back and importers covering early.”
Analysts have been urging the CBSL for months to terminate the swaps and extinguish the liquidity created, warning that a pick-up in credit would expose the external sector. They have described the action as a “political ravishment” of the rupee, pushing the currency below Rs. 305 earlier before the current problems in the FX market emerged.
Bond yields were broadly steady at Friday’s close. A bond maturing 15.12.2026 closed at 8.65/75 percent, up from 8.60/75 percent; the 01.07.2028 bond closed at 9.70/80 percent, down from 9.75/78 percent; and the 15.10.2029 bond at 9.95/10.00 percent, down from 9.95/10.05 percent.
The episode revives concerns about the operating framework of the Central Bank and has added to calls for legislative restraints on the monetary authority’s leeway to print money through various tools and deny convertibility. See also ADB warns rupee depreciation amplifies oil import costs and earlier weekly coverage at Rupee selling rate hits Rs. 319.
