The central bank prevented the rupee from appreciating on a large dollar inflow by purchasing the forex and generating liquidity but has since mopped up some of the liquidity.
By permanently mopping up liquidity through outright sell downs of its Treasuries portfolio, the central bank strengthen the rupee further by reducing future demand and imports.
The more liquid five year Treasury bond yield moved up to 11.72/76 percent in late trading, up from an opening position of 11.63/75 percent.
The benchmark Colombo All Share Price Index closed 22.49 points lower at 5,780.83, down 0.39 percent and the S&P SL20 closed 3.48 points lower at 3,213.87, down 0.11 percent.
Turnover was Rs. 1.28 billion according to provisional data, up from 750.85 million the previous day, with shares of 66 firms gaining against 116 losing.
Foreigners bought shares worth 439.08 million rupees, up from 165.68 million rupees the previous day, and sold 49.25 million worth of shares, up from 18.5 million rupees.
Troubled Touchwood, closing 2.00 rupees lower at 3.10 rupees saw a little more than 21 million shares change hands and CIFL, closing 20 cents lower at 1.10 rupees saw a more than 3.4 million hands change hands.
Nestle Lanka closed 63.40 rupees lower at 1,900.90 rupees and Asian Hotels and Properties closed 4.10 rupees lower at 67.90 rupees.
CTC closed 5.00 rupees lower at 1,045.00 rupees and Sri Lanka Telecom closed 50 cents lower at 38.70 rupees.
Bukit Darah closed 7.00 rupees lower at 665.00 rupees.
JKH closed one rupee higher at 219.00 rupees and featured in two crossings.
Ceylinco Insurance closed 35.60 rupees higher at 1,290.00 rupees. Commercial Leasing and Finance closed 10 cents higher at 4.00 rupees.
Sampath Bank closed 2.10 rupees higher at 172.00 rupees and featured in four crossings. Asiri Hospital closed 30 cents higher at 15.10 rupees.
The rupee appreciated against the US dollar in late trading at 131.50/60, strengthening from an opening position of 132.00/05 in the spot market.