The rupee closed at 155.50/70 per dollar, compared with Friday's close of 155.45/55. It hit a record low of 155.90 per dollar on Feb. 14.

"There was importer demand today and the exporters were staying away as they wanted to see where the (rupee) will be with the seasonal importer demand," said a currency dealer.

The rupee has weakened 1.43 percent so far this year after declining 2.5 percent last year and 3.9 percent in 2016.

It is expected to be pressured by continued importer demand for dollars ahead of the traditional New Year in April, dealers said.

A gradual depreciation in the rupee and higher volatility this year are expected on account of debt repayments by the government, dealers added.

The International Monetary Fund on Friday said Sri Lanka's economy remains vulnerable to adverse shocks due to its large public debt and low external buffers.

The government must repay an estimated 1.97 trillion rupees ($12.68 billion) in 2018 - a record high - including $2.9 billion of foreign loans and a total of $5.36 billion in interest.

Foreign investors sold government securities worth a net 3.2 billion rupees in the week ended Feb. 28, central bank data showed.

Dealers also said the communal violence in the central district of Kandy weighed on sentiment.

Police said on Friday they were investigating whether 10 suspected ringleaders of a wave of attacks on Muslims by Sinhalese Buddhists had outside funding or foreign help.

After five days of violence, police said the situation has calmed down and the curfew lifted since Saturday in Kandy.