The Sri Lankan rupee (LKR) appreciated by 2.8% against the US dollar (USD) in the first 37 days of 2019, outperforming other South Asian currencies which appreciated less than the LKR or depreciated in the same period. In fact, when compared to six other comparable Asian currencies including the Indian rupee, Bangladeshi taka, Pakistani rupee, Vietnamese dong, Thailand baht, and Malaysian ringgit, the LKR outperformed all but the Thai baht so far this year. The Lankan rupee was 182.91 against the dollar on 1 January but appreciated significantly to close at 177.82 on 6 February (Wednesday). In the same period, the Pakistani rupee, Malaysian ringgit, and Thailand baht appreciated while the Indian rupee, Vietnam dong, and Bangladesh taka lost value. Regional giant India saw a depreciation of 2.9% in its rupee during this period – the worst among these seven countries. According to reports, the Indian rupee lost its value due to rallied up global oil prices. Traders expect further volatility in the currency ahead of the country’s general election in April-May this year. The Pakistani rupee appreciated by 0.4% and the Malaysian ringgit rose by 1.47% against the USD during this period while the Vietnam dong depreciated 0.2% and the Bangladeshi taka came down by 0.05%. The Thai baht performed the best by appreciating 3.5% in 2019, supported by increased global investor purchases, lower inflation levels, and widened current account surplus. Measured by the dollar index movements, during this period, the dollar was weakened by 0.3%. The Dollar Index is an indicator of the value of the USD in relation to a basket of leading foreign currencies which includes the euro (EUR), Japanese yen (JPY), pound sterling (GBP), Canadian dollar (CAD), Swedish krona (SEK), and Swiss franc. The appreciation of the the LKR was driven by increased purchases of government securities by foreign investors and reduced outflows from the stock market. Interestingly, this appreciation came despite international credit rating agency Fitch Ratings having revised its projection for the LKR from 186.00 per USD for this year and 192.00 in the next year, from its previous projections of 177.00 and 183.00 respectively. The LKR depreciated by 19% in 2018 which was one of the worst depreciation cycles in the region, driven by a strengthening dollar, domestic political uncertainty, and foreign outflows from the bond and stock markets. Nevertheless, depreciation was credited for triggering the first-ever import decline in 17 months last November, thereby narrowing the trade deficit. – By Madhusha Thavapalakumar