The rupee firmed 0.63 percent to 127.60/70 to the dollar, its highest since May 10, compared with Wednesday's close of 128.40/50, Reuters data showed. The currency hit 127.00 during trading, dealers said.
Central Bank Governor Ajith Nivard Cabraal said the rupee was likely to further appreciate due to continuous inflows.
'With the seasonal demand for imports is over, inflows will help the rupee to stabilise,' Cabraal told Reuters. 'It looks like the rupee will appreciate further.'
Colombo Stock Exchange's main index rose 0.27 percent or 14.70 points to close at 5,527.36, its highest since Dec. 13.
Analysts said the fall in T-bill yields on Wednesday helped the market to gain while investors shrugged off concerns over slowing economic growth after the central bank on Wednesday revised down 2012 economic growth target to 6.5 percent from an earlier 6.8 percent.
Treasury bill yields eased between 21-27 basis points at a weekly auction on Wednesday in line with the central bank's rate cut last week.,
Total turnover in Thursday's trade was 811.9 million rupees ($6.32 million), less than this year's daily average of 891.6 million rupees. Foreign investors were net buyers of 532.4 million rupees worth of shares, extending the net foreign buying so far this year to 37.47 billion rupees. ($1 = 128.4000 Sri Lanka rupees)
(Reporting by Shihar Aneez; Editing by Ron Popeski) Keywords: MARKETS SRILANKA/
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