"The US dollar opened at Rs. 131.90-132.00. Continuous selling of the greenback from the market opening saw the rupee strengthen to Rs. 131.40 where the US dollar found support on light importer demand and closed weaker at Rs. 131.65-70. The highest trade for the day was at Rs. 131.90 and lowest was at Rs. 131.40," the Sri Lanka Forex Association said.
Maturing Treasury bills amounting to Rs. 7 billion were offered at the auction, attracting bids amounting to Rs. 27 billion of which Rs. 7.6 billion was accepted by the Central Bank.
The three-month Treasury bill yield fell to 11.41 percent from 11.44 percent a week earlier while the six-month bill saw its yield ease to 12.91 percent from 13.12 percent a week ago. The 12-month Treasury bill yield fell to 13.30 percent from 13.36 percent.
"Benchmark interest rates have not eased significantly but we could expect this trend to continue moving forward," a currency dealer said.
Dealers said the easing of interest rates were long overdue as they were already too high.
With many banks already nearing their lending limits set by the Central Bank, liquidity was improving in the financial market.
Dealers said it was unlikely the Central Bank would change its monetary policy stance for the rest of the year.
"Brining down policy interest rates would be premature because then this could feed into credit growth and inflation. Raising policy rates could also be ruled out given the slowdown in the economy. So if nothing dramatic happens, we could expect policy interest rates to remain unchanged for the rest of the year," a currency dealer said.
Meanwhile, the Colombo Stock Exchange fell for the second consecutive day on Wednesday.
The All Share Price Index fell 1.04 percent down 61.67 points to close at 5,849.14 while the Milanka Price Index of more liquid stocks fell 0.98 percent to close at 5,488.71, down 54.22 points from its previous close.
The S&P SL20 fell 1.14 percent, losing 36.09 points to close at 3,141.64.
When the bourse commenced its bull run last month, brokers and research analysts had said the upward trend would continue if interest rates eased further. They had noted the upward movements of Treasury bill auction yields and said it was haunting sentiments at the bourse. However, heavy profit taking has put down the bourse despite the welcome news that Treasury bill yields had eased yesterday.