• Rupee appreciates over 10% as investor sentiment improves
• Strong export performance and favourable economic conditions boost currency

The Sri Lanka rupee ranks as the top performer among emerging market currencies in the first 10 months of 2024, with a spot return of over 10%, according to Bloomberg market data.

Accordingly, emerging-market currencies were mostly down against the dollar in the first ten months of 2024, with Sri Lanka, Malaysia, and South Africa ranking top in the chart.

As of the end of October, Sri Lanka had a spot return of 10.56%, while Malaysia and South Africa had spot returns of 4.87% and 4.01%, respectively.

Meanwhile, worst performing currencies include Nigeria and Egypt with a spot return of negative 44.53% and negative 36.88%.

Speaking to The Daily Morning Business, First Capital Chief Research and Strategy Officer Dimantha Mathew said that they forecast for the rupee to be in the range of Rs. 295-305 per US dollar until December.

He said that consumer demand has not really accelerated in line with their expectations which has led to the appreciation of the rupee, while on top of that Sri Lanka is currently in the peak season of exports and tourism which has also supported the appreciation.

Moreover, in early October Bloomberg Intelligence said that the non-radical approach by President Anura Kumara Dissanayake is pushing up the rupee due to improving investor sentiment.

“Our foreign exchange decomposition model suggests improving investor sentiment is pushing up the currency, the main reason - new president Anura Kumar Dissanayake’s recent steps suggest that he’s not as radical as the market was thinking,” it said.

According to them, the cumulative contributions of four factors have moved the rupee up since 1 September - domestic sentiment, growth and monetary policy, and US growth.