MONETABRIEF – Sri Lanka's rupee weakened below 332 to close at 332.20/35 to the US dollar, dealer said amid high excess liquidity while bond yields edged up.

There have also been some foreign selling in rupee bonds this week.

The central bank in triggering forex crises during 2015-2019, in the run up to the first default, printed money, depreciated the currency by dishonoring them as private credit picked up, put foreign investors to flight and blamed them for the falling rupee.

The 2026 currency crisis and inflation spike was the first that was engineered by macro-economists by monetizing a balance of payments surplus and depreciation though buy-sell fx swaps also played a part.

Ironically, in 1966, classical economist B R Shenoy said that inflation from monetizing balance of payments surpluses was only of 'academic interest' in Sri Lanka.

Later in 2026, as the central bank resisted appreciation when foreign investors bought bonds, and there were warning that the inflation and depreciation biased agency tends to do the opposite and depreciates the currency when they go out.

The central bank also lobbied aggressively and go the right to create 7 percent inflation for another three years from October, shortly after exceeding the level in September. It has faced no accountability.

Some bonds yields edged up on Thursday.

Three-month bills closed at 9.20/30 percent Thursday, unchanged from Wednesday’s close of 9.20/30 percent.

Six-month bills closed at 9.45/55 percent, unchanged from 9.45/55 percent.

Twelve-month bills closed at 9.90/10.10 percent, unchanged from 9.90/10.10 percent.

A bond maturing on 15 October 2028 closed at 11.00/10 percent on Thursday, unchanged from Wednesday’s close of 11.00/10 percent.

A bond maturing on 15 September 2029 closed at 11.10/20 percent, down from 11.15/30 percent.

A bond maturing on 15 October 2030 closed at 11.60/70 percent, up from 11.55/65 percent.

A bond maturing on 1 December 2031 closed at 11.85/95 percent, unchanged from 11.85/95 percent.

A bond maturing on 15 December 2032 closed at 12.10/20 percent, up from 11.95/12.05 percent.

A bond maturing on 1 November 2033 closed at 12.20/30 percent, unchanged from 12.20/30 percent.

A bond maturing on 15 October 2034 closed at 12.40/50 percent, up from 12.35/45 percent.

A bond maturing on 15 June 2035 closed at 12.50/60 percent, up from 12.40/50 percent.

A bond maturing on 15 August 2036 closed at 12.30/75 percent, up from 12.30/50 percent.

A bond maturing on 1 July 2037 closed at 12.30/75 percent, up from 12.30/60 percent.

A bond maturing on 15 August 2039 closed at 12.30/75 percent, unchanged from 12.30/75 percent. (Colombo/Oct22/2026)