• The Sri Lankan rupee is likely to depreciate in the range of Rs.310-320 against the US dollar in the latter part of the year, First Capital Research (FCR) said. 
• The rupee is expected to appreciate up to Rs.295 in the first half of the year, as the higher taxes eat into the rising consumer demand in the short term, amid the escalation in the cost of living. 
•  Sri Lanka has an annual external debt repayment obligation of nearly US $ 6-7 billion until 2029, which may decline to US $ 3-4 billion in post EDR; hence, the CB is likely to build up its foreign reserve buffer over the coming months, which may exert a downward pressure on the exchange rate.

First Capital Research (FCR) forecasts that the Sri Lankan rupee (LKR) will appreciate up to Rs. 295 against the US dollar in the first half of the year due to higher taxes reducing consumer demand and escalating living costs. The indicative USD/LKR spot exchange rate was Rs. 300.83 recently. Slower consumer demand may decrease imports, while peak tourism season in Q1 2024 and higher remittances could support the rupee. FCR projects a 46.3% increase in tourism earnings to US $3 billion and a rise in worker remittances to US $6.6 billion this year, from US $6 billion last year.

FCR anticipates the LKR to depreciate to Rs. 310-320 against the US dollar later in the year, driven by increased import demand and the resumption of foreign loan repayments after the External Debt Restructuring (EDR) completion. The notable reduction in consumer-driven imports early in the year, attributed to the front-loading of imports last year, has supported rupee appreciation. Additionally, the Central Bank's (CB) US dollar purchases to boost foreign reserves have contributed to this trend. FCR expects Sri Lanka to end the year with US $6.3 billion in foreign reserves, although this accumulation may slow as the government begins loan repayments post-EDR.

FCR also notes that the anticipated import relaxations and loan repayments might partially offset currency appreciation in Q4 2024. They expect that GDP growth and eased import restrictions could slow down the rupee's appreciation. Sri Lanka faces an annual external debt repayment obligation of nearly US $6-7 billion until 2029, potentially decreasing to US $3-4 billion post-EDR. The CB's efforts to build up foreign reserves might put downward pressure on the exchange rate. Recent moves, such as relaxing cash margin deposit requirements on specific imports, indicate a trend towards removing import restrictions, including on vehicles, which could further impact the rupee.

Rupee expected to dip to Rs.310-320 range later this year: FCR | Daily Mirror