The Sri Lankan rupee surged against the dollar, snapping a nine-day losing streak to become Asia’s best-performing currency on Friday.

The rupee strengthened as much as 2.7%, its biggest gain since March 2023, reversing losses from Thursday when it slid to a three-year .

Friday’s strengthening of the rupee may have been due to some market players deciding to sell dollars before upcoming inflows from the International Monetary fund and Asian Development Bank, Deputy Minister of Finance and Planning told reporters in Colombo.

Sri Lankan authorities have been signaling potential measures to stabilize the currency. The government has already imposed an import duty surcharge on private vehicles, while the central bank previously said it intervenes in currency markets to contain volatility.

Currencies across Asia have come under pressure due to the oil shock caused by the Iran war. The Sri Lankan rupee is Asia’s worst performer this year.

The decline in the currency has been heightened by of further weakening, as importers buy more dollars and exporters delay conversion of the foreign currency holdings, according to the government.

Sri Lanka’s central bank has taken various steps to maintain financial stability, Fernando said on Friday without elaborating.

The country’s central bank is due to deliver its rate decision on May 26, with most economists in a Bloomberg survey expecting a hike. Monetary tightening and the anticipated inflows could help the rupee stabilize and appreciate, according to analysts.

“If the authorities announce a proper macro adjustment to stop these leakages through FX, imports, while taking measures to fasten export conversion and monetary tightening, there will be a stabilization of the rupee,” said Sanjeewa Fernando , chief economist at Asia Securities Pvt. Ltd.

Source: Bloomberg 

--Agencies