The rupee edged up to 125.50/55 to the dollar, from Friday's close of 125.50/70, its strongest close since April 9, 2012.
'There are strong inflows from inward remittances. Exporters also converted dollars to pay salaries and bonuses ahead of the new year festival,' said a currency dealer who declined to be identified.
'A state bank was seen buying dollars at 125.50 to prevent sharp appreciation.'
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 stock index ended 0.2 percent, or 11.44 points, firmer at 5,777.38, its highest since Feb. 15.
Turnover slumped to a two-week low of 398 million rupees, less than half of this year's daily average of 1 billion rupees as many investors were on holiday ahead of the traditional new year.
Foreign investors were net buyers of 34.8 million rupees worth of shares, extending the year-to-date net foreign inflow to 5.85 billion rupees ($46.58 million). Last year, the bourse saw a net inflow of $303 million. ($1 = 125.6000 Sri Lanka rupees)
(Reporting by Shihar Aneez; Editing by Subhranshu Sahu)
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