News & market updates

Sri Lanka has issued a Gazette to systematically monitor imports, requiring detailed importer information and mandating banks to assign a separate identification number for each transaction to curb illicit foreign-exchange outflows. The move follows disclosures of scams using fake company registrations and aims to protect reserves without fully restricting trade.

Former Finance Minister Ravi Karunanayake has asked President Dissanayake to cut the Central Bank’s inflation target to 2% ahead of the October 2026 statutory review. He cited recent inflation breaches (5.4% in April, 5.5% in May), currency weakness and fuel-driven price pressures as reasons.

Oil prices rebounded after US–Iran peace talks were postponed, with Brent back above $80/bbl and WTI at $76.28, as Switzerland confirmed the delay. Cancellation of the U.S. VP's planned attendance and IDF strikes in southern Lebanon added to geopolitical uncertainty.

Oil prices fell as tankers resumed transit through the Strait of Hormuz after a US‑Iran interim deal; Brent was $79.42/bbl (down $0.43, -0.54%) and WTI $76.43/bbl (down $0.17, -0.22%).

CoPF chair Harsha de Silva questioned CPC's FX management after a reported $46m single-day dollar purchase on 29 May, warning large one-off buys can destabilise the FX market. CPC says it will smooth purchases, planning $11m daily and preparing multi-day buying plans after fuel import bills jumped from ~$100m to >$500m monthly.

The US and Iran signed a memorandum committing to a 60-day ceasefire and reopening the Strait of Hormuz, with waivers expected to allow Iran to resume oil exports. The accord also envisages a $300 billion reconstruction fund and sets tougher talks for a final deal within 60 days.

Fitch says a rising share of emerging-market sector outlooks are 'deteriorating' as the US–Iran war disrupts oil supplies, explicitly flagging APAC banks in Sri Lanka and the Philippines as hit by the shock. Sovereigns may see spillovers to growth, inflation and bond yields.

Deputy Finance Minister Anil Jayantha Fernando said the rupee’s 7% year-to-date fall, which hit a four-year low of 354 LKR on May 21, is mainly driven by speculation and false information. The Central Bank used $211.3m of reserves in May, hiked the OPR 100bp to 8.75% and shortened the exporters' dollar-conversion window to 30 days.

The U.S. and Iran signed an interim peace deal extending the ceasefire by 60 days, leaving Asian stocks largely steady while oil prices dipped (U.S. crude $75.83, Brent $78.41); investors also digested Fed officials' hawkish comments that lifted yields and shifted market sentiment.

Weekly Treasury Bill auction saw yields fall for the first time in five weeks — the 91-day yield fell 7bp to 10.02% and the auction raised the full Rs.70 billion offered. Secondary bond yields extended their rally, money market surplus was Rs.43.19bn, and USD/LKR closed near 333.5/334.25.

Deputy Finance Minister says the government will assess whether to extend its three-month Rs.10bn fuel relief at the period's end and sees no immediate need to decide; he added the 50% vehicle import surcharge cut demand, with daily forex for vehicle imports down to $3.79m by 12 June.

The Bank of Japan raised its policy rate to 1.0% from 0.75%, the highest level since 1995, citing rising global energy prices and growing inflationary pressure.

Sri Lanka imposed a temporary 50% surcharge on customs import duty for new personal vehicles; daily vehicle import outflows fell to US$3.79 by June 12, Deputy Finance Minister Anil Jayantha Fernando said. Vehicle imports totaled US$613m in Q1 2026 and US$821m by April, contributing to a 4.5% rupee depreciation and the central bank using US$211.3m of reserves in May.

Sri Lanka will stick to a 5% growth target despite the Central Bank's 100bp policy rate hike to 8.75% and falling consumption; Q1 GDP expanded 5.1%. The rate rise, 27% private credit growth and steep fuel price increases are cited as headwinds, while the IMF has cut its growth forecast to 3%.

Secondary government bond market rallied and yields dipped on selected tenors (e.g. 15.12.26 at 10.25%; 15.02.28 ~10.85%). A Treasury Bill auction will offer Rs.70bn (Rs.35bn 91-day, Rs.25bn 182-day, Rs.10bn 364-day); USD/LKR about 334.75/335.50 and call money ~9.21%.

Kapruka Holdings PLC (KPHL.N0000) returned to profitability for the year to 31 Mar 2026 with PBT of Rs.37.56m on revenue of Rs.1.92bn, and quarterly PBT of Rs.22.25m (up 160% YoY) as revenue grew 19% QoQ. Management credits AI-driven platform, marketplace expansion and cross-border USD sales, plus EV fleet conversion, for improved margins.

Brent crude fell below $80, down more than one-third from recent peaks after reports the U.S. will waive sanctions on Iranian oil, easing inflation fears and pushing global bond yields lower ahead of Kevin Warsh's debut as U.S. Fed chair. Markets awaited Warsh's guidance on future rate moves.

Oil prices dipped as investors weighed a US‑Iran deal and uncertainty over the Strait of Hormuz: Brent fell to $78.80/bbl (-0.2%) and WTI to $75.80/bbl (-0.3%), both down about 5% over two sessions to three‑month lows. Markets expect a removed geopolitical premium if shipping fully resumes, but tanker traffic has yet to recover.

Sri Lanka's rupee was quoted at 333.50/335.00 to the US dollar and bond yields fell sharply ahead of a 70 billion rupee treasury bill auction. Yields on several government bonds eased (e.g., 01.08.2030 at 11.22/25% from ~11.40/50%), while Brent crude prices declined.

Colombo market closed flat as the ASPI fell 0.02% to 22,377.29 after an early peak at 22,563.09, while the S&P SL20 rose 0.03% to 6,221.32 on turnover of Rs. 3.85bn. Foreigners were net buyers (Rs. 427.1m); top contributors were JKH, HAYL, DOCK, BREW and BIL, with CARG, CINS, SAMP, NDB and CFIN weighing on the index.

The Bank of Japan raised its short-term policy rate to 1.0% from 0.75%, the highest since 1995, citing broadening inflation from higher energy costs; it will pause bond tapering, continue ~¥2tn/month JGB purchases and signalled gradual further hikes while the yen and Nikkei reacted.

Secondary bond market rallied on peace-deal optimism and a reported budget surplus of Rs. 105 billion for Jan–Apr 2026, driving sharp declines in yields across the curve (2030 tenors around 11.30%–11.40%). The rupee strengthened to Rs. 333.00/334.50 and Brent crude fell, easing inflation and external pressures.

The Bank of Japan raised its policy rate to 1%, the highest since 1995, as Asian stocks made modest gains while initial optimism over a preliminary U.S.-Iran deal cooled. Brent crude fell to $82.96 a barrel and gold rose, with mixed currency and equity moves across the region.

CBSL Governor Nandalal Weerasinghe told Parliament the Sri Lankan rupee weakened 8% vs USD between end-2025 and 9 June 2026 and defended a flexible exchange rate under the FIT framework as a shock absorber, citing higher imports, lower tourist inflows, speculation and financial outflows.

Brent crude fell about 4.5% to below $83.4 per barrel after the US and Iran confirmed a deal to end the war, triggering global equity gains. Asia-Pacific indices and US futures rose as analysts said lower oil should ease inflation pressure ahead of the US Federal Reserve rate decision.

ASPI jumped 3.43% (743.22 pts) to 22,380.65 as markets rallied on signs of a possible end to the Middle East war, with index-weighted counters SAMP, COMB, JKH, MELS and DIAL among top contributors; turnover exceeded Rs.4bn and foreigners were net buyers (Rs.21.1m).

Colombo Stock Exchange ASPI rose 0.34% to 22,456.18 (up 75.53 pts) as turnover reached 2.42 billion rupees, with materials leading turnover at 1.4 billion. Top positive contributors were Melstacorp, Commercial Bank, HNB and DFCC, while LOLC and Prime Lands were top decliners.

Sri Lanka has spent 17.4% of its 2026 capital budget, about Rs.240 billion of Rs.1,380 billion, the National Budget Department director told Parliament; officials said some capital expenses will remain unspent and that Rs.20 billion cited was a reallocation after a fuel price hike.

World Bank cut its global growth forecast to 2.5% for 2026, warned higher energy and fertiliser prices will raise inflation, and is making $50–60bn available immediately (scalable to $80–100bn over 15 months) to support vulnerable countries.

Colombo Stock Exchange rose 3.17% midday Monday after news of a US‑Iran framework deal; banks led gains with Sampath at 146.25, Commercial Bank at 209.50 and Hatton National Bank at 405, driving the ASPI higher.