The rupee closed at 156.00/10 per dollar, compared with Monday's close of 156.05/15.

"There were (dollar) conversation's for salaries and to pay bonuses ahead of the festival," said a currency dealer.

The rupee is expected to remain under pressure on continued importer demand for dollars ahead of the traditional New Year in mid-April, dealers said.

The rupee touched an all-time low of 156.20 per dollar on March 16. The rupee has weakened 1.69 percent so far this year after declining 2.5 percent last year and 3.9 percent in 2016.

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

The International Monetary Fund said on March 9 that Sri Lanka's economy remained 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 - including $2.9 billion of foreign loans and a total of $5.36 billion in interest.

Foreign investors sold government securities worth a net 211.7 million rupees in the week ended March 21, central bank data showed.