The Sri Lankan Rupee has experienced significant volatility against major foreign currencies, particularly the US Dollar, over recent weeks, marked by periods of sharp depreciation, a brief but notable recovery, and a subsequent return to weakening trends.
Initial Depreciation and Economic Strain
In early May, the Rupee continued to weaken against the US Dollar, with the selling rate reaching Rs. 329.92 on May 8, 2026, its highest level since December 27, 2023. Between January 1 and May 8, 2026, the Rupee depreciated by 3.6% against the US Dollar. This initial decline was partly attributed to external pressures from Middle Eastern conflicts that began in late February 2026, alongside a decline in the Central Bank of Sri Lanka's (CBSL) official foreign reserves in April 2026, which fell from USD 7,026 million to USD 6,759 million due to foreign debt and postal payments.
The depreciation intensified, with the Rupee falling further by 1.14% against the US Dollar on May 19, reaching a selling price of Rs 338.07. The Sterling Pound also saw a significant rise of 1.80%, selling at Rs 454.83 on the same day. Economic experts warned of a severe market crisis, noting that prices of essential food items had already increased by 10% to 15%. By May 21, the Sri Lankan Rupee was identified as Asia's worst-performing currency for the month, with warnings of further depreciation and significant risks to the economy, including inflation. The direct impact on essential goods was evident, with the minimum bus fare expected to rise from Rs 30 to Rs 40, and the price of a cup of milk tea increasing by Rs 5.00 due to rising imported milk powder costs.
Further economic repercussions emerged on May 22, as the Sri Lanka Mobile Phone Importers and Sellers Association announced that prices of mobile phones and accessories were set to increase by 20% to 25%. Deputy Minister of Finance and Mass Media, Anil Jayanth, acknowledged the public agitation and fear caused by the depreciation, cautioning against comparisons to the 2022 economic crisis, when the US Dollar's selling price had reached Rs 370.
Brief Recovery and Appreciation
Amidst the concerns, the Rupee experienced a slight strengthening on May 22, with the US Dollar selling price decreasing by 86 cents to Rs 353.17, following a sharp depreciation on May 21 when the dollar's selling price had surged by Rs 11.33. However, experts continued to warn of significant risks, including rising prices for essential imported goods, electricity and water tariffs, and increased costs for raw materials for exports, anticipating a notable rise in inflation.
A more substantial reversal occurred on May 24, when the Sri Lankan Rupee experienced a significant appreciation, rising by 2.7% against the US Dollar. This marked its largest single-day gain since March 2023, making it Asia's best-performing currency on that day. This surge was attributed to expected inflows from the IMF and ADB, prompting market participants to sell dollars. The government also introduced taxes on private vehicle imports to stabilize the Rupee. Further strengthening was observed on May 25, with the US Dollar's selling price dropping by Rs 16.75 to Rs 336.42, and the buying price decreasing to Rs 326.01. This trend continued on May 26, with the US Dollar selling price falling to Rs 328.69 and the buying price to Rs 318.32, marking the third consecutive day of appreciation. Economic analysts noted that this appreciation, which began around May 23, reversed earlier predictions that the Dollar could reach Rs 380-400. The initial depreciation in early May had reportedly caused exporters to delay converting their US Dollar earnings.
Renewed Depreciation
However, this period of appreciation proved short-lived. On May 27, the Sri Lankan Rupee experienced a depreciation, with the US Dollar's selling price increasing by Rs 2.12 to Rs 330.81, and the buying price rising by Rs 2.08 to Rs 320.40. This occurred despite the CBSL Governor's statement that the exchange rate had been stabilized.
The weakening trend continued into May 29, with the US Dollar's selling price exceeding the Rs 334 mark. According to CBSL data, the selling value of a US dollar increased to Rs 334.24, a rise of Rs 3.43 from its May 27 value of Rs 330.81. The buying value also increased by Rs 4.05 to Rs 324.45 from Rs 320.40 on May 27.
By May 30, the Rupee saw further depreciation against major foreign currencies. The US Dollar's buying price rose to Rs 326.75 from Rs 325.97 the previous day, and its selling price increased to Rs 336.60 from Rs 335.70. The Sterling Pound's buying price also saw a significant increase, reaching Rs 437.11.