The Sri Lankan rupee depreciated significantly against the US dollar in the first half of 2026 amid global uncertainties and strong foreign exchange demand. The central bank intervened in currency markets and tightened monetary policy to support external stability.
The Sri Lankan rupee lost 7.9 percent of its value against the US dollar during the first six months of 2026, with the exchange rate moving from 309.99 rupees per dollar at end-December 2025 to 336.66 rupees per dollar by June 30, according to the central bank's Market Operations Report. The depreciation occurred against a backdrop of heightened global uncertainties and elevated demand for foreign exchange.
To manage currency volatility and build reserves, the central bank intervened actively in the domestic foreign exchange market. In the first quarter, the monetary authority purchased 791 million US dollars while selling 81 million, resulting in net purchases of 710 million. This pattern reversed in the second quarter, when purchases declined to 191 million dollars while sales increased to 345 million, making the central bank a net seller of 154 million dollars. Overall for the half-year, net foreign exchange purchases totaled 556 million US dollars.
Official gross reserves, including a People's Bank of China swap facility, reached a post-crisis high of 7.3 billion US dollars in late February before declining to 6.5 billion US dollars by month-end June. The central bank strengthened its monetary policy stance by raising its Overnight Policy Rate by 100 basis points on May 26 to 8.75 percent. Short-term interest rates rose correspondingly, with the Average Weighted Call Money Rate climbing to 9.23 percent by end-June.
The central bank stated that monetary policy tightening, combined with macroprudential measures and foreign exchange interventions, supported external sector stability. Money market liquidity remained in surplus throughout the period, averaging 199.5 billion rupees, though this surplus declined from a peak of 403.8 billion rupees in early March to 82.6 billion rupees by end-June.
