Abstract:
This research study carried on to find out whether there is a relationship between foreign
exchange rate and foreign investment in Colombo Stock Exchange. Also it examines the
exchange rate behavior in Sri Lanka and foreign investors' behavior in Colombo Stock
Exchange.
Researcher analyze monthly data for the US dollar and Euro exchange rate, Central
Depository Systems (CDS) foreign investors account details, Foreign Securities of the
Colombo Stock Exchange for the period from January 2015 to December 2019. Key
objective of the study is to find out the relationship between foreign exchange rate and
foreign investment in Colombo Stock Exchange.
To identify exchange rate behavior in Sri Lanka and identify Colombo Stock Market
foreign investors' behavior are other specific objectives. Researcher used 'sensitivity
analysis to find out these objectives. Monthly percentage change of US Dollar rate and
Monthly percentage change of foreign Securities of held in the CDS, Monthly percentage
change of Euro rate and Monthly percentage change of foreign Securities of held in the
CDS, Monthly percentage change of GB Pound rate and Monthly percentage change of
foreign Securities of held in the CDS, Monthly percentage change of Japan Yen rate and
Monthly percentage change of foreign Securities of held in the CDS, were analyzed by
using sensitivity analysis. Then identified there is a strong positive relationship among
those variables within sample period.