Business
Panic, speculation and the mystery behind Sri Lankan rupee’s sudden rebound
The sudden fall and equally rapid recovery of the Sri Lankan rupee within a matter of days has left many Sri Lankans confused about what truly happened inside the country’s foreign exchange market.
Within a short span, the rupee weakened sharply from around Rs. 324-325 against the US dollar to Rs. 354 in parts of the commercial market, before unexpectedly stabilising again close to previous levels. The speed of both the depreciation and the recovery triggered widespread speculation among businesses, importers and the public.
Responding to questions from the media regarding the abrupt divergence between official exchange rates and commercial bank quotations, Central Bank Governor Dr. Nandalal Weerasinghe recently explained that the volatility had emerged mainly outside the formal interbank foreign exchange market.
According to the Governor, Sri Lanka operates through two connected foreign exchange markets. One is the interbank market, where commercial banks exchange dollar liquidity among themselves. The other is the retail market between banks and customers, including importers, exporters and individual foreign exchange buyers.
Under normal conditions, customer buying and selling rates fluctuate within a narrow margin around the interbank market rate. However, during the week leading up to Friday, May 22, an unusual surge in dollar demand disrupted this balance.
The Governor said excessive speculation and panic-driven import demand created abnormal pressure on the market, pushing some customer transactions far above prevailing interbank rates.
“We observed that because of speculation and panic related to imports, there was excessive demand for US dollars,” he explained. “Transactions between banks and customers began taking place well above interbank market rates, which created a distortion.”
While the interbank rate remained around Rs. 320 to the dollar, certain customer transactions were reportedly taking place between Rs. 346 and Rs. 354.
The Central Bank viewed this widening gap as a breakdown in normal market transmission rather than a reflection of underlying fundamentals.
To restore order, the Central Bank held discussions with treasury officials of commercial banks on the evening of May 21 and introduced measures aimed at improving liquidity flows and reactivating smoother interbank trading.
According to the Governor, these measures helped reconnect the interbank market with commercial bank customer pricing, allowing exchange rates to realign rapidly.
“Liquidity returned to the market and buying and selling rates became fully aligned again,” he said. “The market has now normalised.”
The Governor emphasised that the Central Bank’s intervention was limited and intended only to smooth excessive volatility rather than artificially defend a specific exchange rate.
He noted that the authorities intervened only to a certain extent during the sharp depreciation phase and later carried out small operations to reduce market instability while allowing normal demand and supply conditions to function.
The episode has nevertheless raised broader questions about how fragile confidence remains in Sri Lanka’s post-crisis economy despite improving macroeconomic indicators.
Although foreign reserves and external sector conditions have improved significantly since the height of the economic crisis in 2022, the foreign exchange market remains highly sensitive to expectations, rumours and sudden shifts in import demand.
Many ordinary Sri Lankans believe the panic may have been triggered by a surge in Letters of Credit (LCs) opened for vehicle imports amid speculation over increased import activity and future dollar demand.
Meanwhile, Professor Wasantha Athukorale at the University of Peradeniya said remarks made by President Anura Kumara Dissanayake regarding rising US dollar outflows for fuel shipments may also have heightened importers’ anxiety over possible currency instability.
Economists say the episode demonstrates how market psychology can sometimes move exchange rates faster than economic fundamentals, particularly in relatively thin and fragile foreign exchange markets like Sri Lanka’s.
The speed of the rupee’s rebound suggests that the turbulence was driven more by speculative demand, temporary liquidity distortions and market sentiment than by a structural foreign exchange crisis.
Still, for a population that continues to carry memories of shortages, inflation and currency collapse, the brief rupee shock served as another reminder that confidence in Sri Lanka’s economic stabilisation remains delicate.
By Sanath Nanayakkare ✍️
As part of World Investor Week (WIW) 2026, the Securities and Exchange Commission of Sri Lanka (SEC) and the Colombo Stock Exchange (CSE) joined stock exchanges around the world in ringing the market opening bell for financial literacy on 5 October 2026, under the patronage of Dr. Harini Amarasuriya, Prime Minister of the Democratic Socialist Republic of Sri Lanka.
World Investor Week is an annual global campaign led by the International Organization of Securities Commissions (IOSCO) to raise awareness of the importance of investor education and investor protection. The “Ring the Bell for Financial Literacy” initiative, pioneered by the World Federation of Exchanges (WFE), brings together stock exchanges and other stakeholders worldwide to promote greater financial literacy and encourage individuals to make informed financial decisions.
The ceremony also marked the 40th anniversary of the CSE and the joint launch by the SEC and the CSE of the Stock Market Game, an online stock market simulation based on the ATrad trading system.
The Stock Market Game enables participants to gain practical experience of how the stock market works, make investment decisions and construct portfolios of listed shares without using real money. The platform is accessible through the websites of the SEC and CSE and is expected to serve as an important practical tool for promoting financial education. It is envisaged that the Stock Market Game will also be used to conduct simulation competitions among universities and the 100 Capital Market Clubs established in schools across the country.
The ceremony also featured the commemorative issuance of a stamp and First Day Cover to mark the 40th anniversary of the CSE. Issued in collaboration with the Department of Posts and the Philatelic Bureau of Sri Lanka, the commemorative stamp and First Day Cover were presented to Prime Minister Dr. Harini Amarasuriya, by the SEC Chairman Snr. Prof. D.B.P.H. Dissabandara and Ray Abeywardena, Director CSE and Chairman of Central Depository Systems (CDS).
Welcoming the gathering, Rajeeva Bandaranaike, Chief Executive Officer of the CSE, highlighted the importance of obtaining reliable information when making investment decisions.
“We operate in a digital world where a vast amount of information and data is disseminated through social media. While some of this information is factual, some may be inaccurate or misleading. When investing in the stock market, it is essential to make informed and prudent investment decisions. Therefore, investors should obtain information and data from reliable and responsible sources and persons before making investment decisions.”
Addressing the gathering, SEC Chairman Snr. Prof. D.B.P.H. Dissabandara emphasised that the SEC’s role extends beyond regulation to facilitating the further development of the capital market.
“The SEC needs to determine how best to introduce the stock market to Generation Alpha, Generation Beta and generations beyond. When it comes to investors, we need to build confidence in the market, because people will invest only when they have confidence in the market.’’
Business
Rs. 5 million worth of prizes to be given at 8th edition of CSE Masterminds Quiz Competition
The Colombo Stock Exchange (CSE) has announced that the eighth edition of the CSE Masterminds Quiz will be held on 9th October 2026, from 3.00 p.m. onwards, at the Main Ballroom, Shangri-La Colombo.
Recognised as Sri Lanka’s premier capital market quiz competition, CSE Masterminds brings together teams from the public and private sectors. Participants will be tested across international business, global markets, current affairs, the Sri Lankan economy and business, the Sri Lankan stock market, and sports and entertainment, before a concluding rapid-fire round.
This year the winning team can win up to Rs. 2,000,000, the runners-up up to Rs. 1,000,000, and the second runners-up Rs. 750,000. Sector awards will also be presented to the highest-performing team from each participating sector. Guest participants will also be able to compete in rounds of Audience questions, and will have the opportunity to participate a raffle draw for three free return tickets provided by Fits Aviation (Pvt) Ltd.
The evening will also include an exclusive after-party with live music provided by the band ‘Doctor’ featuring guest performer Umara Sinhawansa, fine food and beverages, providing an opportunity for networking and celebration. Every participant will receive a premium goodie bag made possible by the support of the event’s sponsorship partners. Collectively, the event will feature over Rs. 5 million worth of prizes, rewards, and giveaways, encompassing championship prizes, sector awards, audience engagement prizes, raffle draw offerings, and goodie bags.
Sponsorship partners include:
Platinum Sponsors: Hatton National Bank PLC and Bartleet Religare Stockbrokers (Pvt) Ltd.
Gold Sponsors: Ex-Pack Corrugated Cartons PLC, Asha Securities Ltd., and Lanka Securities (Pvt) Ltd.
Silver Sponsors: Barista Coffee Lanka (Pvt) Ltd., Capital Trust Holdings (Pvt) Ltd., LOLC Holdings PLC, Arpico Ataraxia Asset Management (Pvt) Ltd., IronOne Technologies (Pvt) Ltd., and LankaPay (Pvt) Ltd.
Co-Sponsors: Access Engineering PLC, Bank of Ceylon, Commercial Bank of Ceylon PLC, CryptoGen (Pvt) Ltd., Deloitte Lanka (Private) Limited, Dialog Finance PLC, Efutures (Pvt) Ltd., People’s Leasing & Finance PLC, Senfin Asset Management (Pvt) Ltd., and Softlogic Stockbrokers (Pvt) Ltd.
Business
NCCSL to conduct practical workshop on food labelling and advertising regulations in Sri Lanka
The National Chamber of Commerce of Sri Lanka (NCCSL) is organizing a one-day practical workshop on “Food Labelling & Advertising Regulations in Sri Lanka” on Thursday, 8th October 2026 from 9.00 a.m. to 4.30 p.m. at the National Chamber of Commerce, Colombo 10. The workshop has been organised to provide a practical understanding of the latest regulatory requirements governing the food products labelling and advertising of food products in Sri Lanka, with particular attention to regulatory developments applicable in 2026, compliance requirements, and the potential legal and financial implications of non-compliance.
As food products increasingly compete not only with quality and price but also on packaging, labelling and promotional claims, businesses must ensure the information they communicate to consumers is accurate, transparent and consistent with applicable regulatory requirements. Understanding these requirements is therefore essential for businesses seeking to protect their brands, maintain consumer confidence, and minimize regulatory and legal risks.
The practical workshop will go beyond an overview of regulations and focus on how businesses can apply regulatory requirements in their day-to-day operations. Participants will be guided through key areas of food regulatory compliance, including the national food regulatory framework, recent food labelling regulations and key changes, mandatory approvals and prohibitions relating to food labelling, and the litigation process associated with regulatory violations. The programme will also cover several areas of growing importance to the food industry, including the EU EMPCO Directive, food colour coding regulations, regulations relating to food trans-fatty acids and the importance of compliance in the use of food additives. Practical exercises will further enable participants to apply their knowledge to real-world compliance situations and strengthen their ability to identify potential regulatory concerns.
For further information and registration, please contact the National Chamber of Commerce of Sri Lanka on 011 4741788 – Nethmi or Udula – 071 403 4775.
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