Foreign investors purchased approximately $4.1 million worth of Sri Lankan rupee bonds in the week ending August 14, continuing a trend of steady inflows that has accumulated to over $220 million since mid-June.

Foreign investors made net purchases of 1,350 million rupees (US$4.1 million) in Sri Lankan government securities during the week ended August 14, according to Central Bank data. The transaction reflects renewed confidence in rupee-denominated assets as the local currency has shown signs of recovery following months of volatility.

The latest purchases represent part of a broader pattern of foreign interest in Sri Lankan bonds. Over nine consecutive weeks since June 19, foreign investors have accumulated 72.9 billion rupees ($220.8 million) in government securities. This activity has elevated total foreign holdings to 194.2 billion rupees, marking the highest figure recorded in the Central Bank's Weekly Economic Indicators, though officials cautioned that this figure fluctuates daily with economic conditions.

The rupee's recovery has been notable after significant depreciation earlier this year. The currency had reached a near three-year low of 354 against the U.S. dollar in May before strengthening to around the 340 level. The Central Bank attributed earlier weakness to increased imports of oil and vehicles amid Middle East tensions. Through August 14, the rupee has declined 7.1 percent for the year overall.

Monetary policy adjustments have accompanied currency stabilization efforts. The Central Bank raised its key policy rate by 100 basis points in May to manage inflation pressures, particularly following fuel price increases. Year-to-date inflows into rupee bonds total approximately 52.9 billion rupees, surpassing the 71.5 billion rupees recorded for the entire previous year. Analysts attributed the inflows partly to Sri Lanka's previous deflationary policies, though recent fuel price adjustments have begun to impact inflation levels.