The spot rupee closed at 153.55/65 per dollar, steady from Tuesday's close of 153.55/60.

"Today, there were inward remittances in the morning. But because of dollar-buying by the state banks, the rupee ended steady," a currency dealer said, requesting anonymity.

"Cabinet approval for the Hambantota port deal is seen as a positive sentiment."

Sri Lanka's cabinet cleared a revised agreement to lease its Chinese-built southern port of Hambantota on Tuesday, after terms of the first pact sparked widespread public anger in the island nation. The investment on the deal is expected to be around $1 billion.

Last week, central bank Governor Indrajith Coomaraswamy said the rupee was still "over-valued" and that the monetary authority was still buying dollars to avoid any appreciation.

The banking regulator is compelled to buy dollars from the market to meet a reserves target set by the International Monetary Fund (IMF) under a $1.5 billion, three-year loan programme.