Sri Lanka suffers foreign selling in rupee bonds after three weekly buying

EconomyNext reports, citing Central Bank figures, that offshore investors sold a net Rs. 2.818 billion (US$8.5 million) of Sri Lankan rupee bonds in the week ending October 23. Hiru News likewise reports that investors returned to selling after three weeks of buying. EconomyNext says this was the first weekly net sale in four weeks.

EconomyNext reports that the latest transaction brought net foreign selling over six weeks to Rs. 13.8 billion, after investors bought a net Rs. 5.5 billion during the three weeks before the latest sale. The outlet says selling occurred in three of the past 19 weeks. It reports that net inflows into local-currency bonds had reached about Rs. 58.3 billion so far in 2026, following Rs. 71.5 billion in net inflows the previous year.

EconomyNext says analysts linked bond sales to modest downward pressure on the rupee. The outlet reports that the currency had held steady for more than three years before a sharp fall in May, and had lost 6.7% of its value through October 27. EconomyNext says the Central Bank linked the earlier currency pressure to increased oil and vehicle imports amid continuing conflict in the Middle East.

EconomyNext reports that the rupee subsequently stabilized after the Central Bank lifted its main policy rate by 100 basis points in May, aiming to limit inflationary pressure associated with stronger demand. It says inflation had risen over the preceding six months after fuel prices climbed by nearly 50%. The government increased fuel prices in the final week of September, following reductions in June and August.

EconomyNext reports that investors worldwide were wary of economic growth prospects amid a further escalation in the Middle East. The outlet says that before the May rate increase, the Central Bank had kept its key rates unchanged from May 2025, after cutting them by a cumulative 825 basis points during the 24 months beginning in June 2023.