"The narrower spread indicates that there is liquidity in the market," a dealer told LBO.
The lowest previous close was 113.10/20 on August 29 with a spread of 10 cents between buy and sell quotes amidst uncertainty.
Earlier in the day overnight call money touched 25 percent but settled around 15 percent with liquidity improving and the Central Bank draining cash through an overnight auction at 11.75 percent.
Market repos were quoted as low as 12.5 percent to 13.5 percent.
A low policy rate structure which is 500 basis points below market rates has made Sri Lanka's short term rates volatile.
Meanwhile the Central Bank said its end-August reserve money volume was 257.1 billion rupees against an end-September target of 257.8 billion rupees.
But the Central Bank's T-bill stock which shows financing of the government shot up to 76 billion from 59 billion a week earlier, which is viewed with some trepidation by economic analysts as it may indicate a further deterioration of international reserves.
Sri Lanka is planning a 500 million dollar bond issue, ostensibly for infrastructure, but which analysts say would help tide over fiscal tightness and shore up foreign reserves.
Fund mangers in Hong Kong told the Bloomberg newswire that risk premiums for emerging market debt were going up and investors were shying off risky bonds.
"All bets are off in a situation where investors are generally looking to decrease risk in their portfolios,'' Joel Kim of ING Investment Management who manages a 10 billion dollar fund in Hong Kong said.
"They need to wait for better market conditions.''
Sri Lanka has a B+ rating from Standard and Poor's and BB- rating from Fitch.