The rupee edged up to 125.50/70 to the dollar, from Thursday's close of 125.65/70, its strongest close since April 9, 2012.
"Inflows from inward remittances continued. This will be the trend until the new year festival, imports have also diminished," a currency dealer said who declined to be identified.
"But we expect it to fall after the new year with imports picking up," the dealer said.
Most Sri Lankans will celebrate the traditional new year on April 13 and April 14.
The currency has risen 1.6 percent this year after falling 10.7 percent in 2012.
The main index ended 0.22 percent, or 12.38 points, firmer at 5,765.94, its highest since Feb 18.
Foreign investors, who mainly bought banking stocks, were net buyers of 155.6 million rupees worth of shares, extending the year-to-date net foreign inflow to 5.82 billion rupees ($46.26 million). Last year, the bourse saw a net inflow of $303 million
Expectations of easing interest rates and improved earnings outlook have helped boost foreign demand on banks as well as local retail investor sentiment, analysts said.
Yields in T-bills were steady at a weekly auction, ending a four-week rising trend, two days after the central bank chief said that market interest rates would ease this year as the monetary authority maintains a loose monetary policy stance. ,
Turnover was 634.2 billion rupees ($5.04 billion), well below this year's daily average of 1 billion rupees.
($1 = 125.8000 Sri Lanka rupees)
(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anand Basu)