FINANCIAL CHRONICLE – Sri Lanka’s Central Bank is set to introduce a benchmark intra-day reference exchange rate this year to enhance transparency in the foreign exchange market, according to Central Bank Governor Nandalal Weerasinghe.

The absence of a reference exchange rate has previously hindered the growth of Sri Lanka’s forex market and discouraged the trading of rupee-denominated derivatives. Last year, the Central Bank completed the necessary preliminary work to establish the benchmark spot exchange rate.

“A benchmark intra-day reference exchange rate will be introduced in 2026 to foster a transparent foreign exchange market,” Governor Weerasinghe announced during the unveiling of the Central Bank’s policy agenda for 2026. “This benchmark will guide market participants, help reduce volatility, and promote more competitive pricing on a given date, thereby enabling the introduction of more innovative products in the foreign exchange market.”

Sri Lanka’s foreign exchange market currently offers limited derivatives, such as currency swaps and options, aiming to broaden the market and attract inflows. However, these instruments have struggled due to the lack of a reliable reference exchange rate, amid concerns over excessive speculation, risks of rupee over-appreciation, and interventions distorting clean floating rates.

Currency dealers have welcomed the initiative, noting that it will contribute to market expansion. “This will expand the market with more products and promote rupee-denominated derivatives,” said a currency dealer from a local bank. “It is something the market needed to fix in derivative prices. This is a pricing mechanism for rupee-denominated derivatives.”

(Colombo/January 08/2026)