Overnight call rates which hit 50 percent a week ago eased to 15 percent as cash that left the banking system during the April festive season started coming back, dealers said.
Though the central bank has tightened monetary policy to block money printing easing pressure since January, analysts have pointed out that the rupee is technically overvalued by some 13.7 percent in real effective exchange rate terms due to inflation created earlier.
Economists say the rupee has to depreciate to restore Sri Lanka's export competitiveness.
Sri Lankan authorities use the dollar as the intervention currency, maintaining a loose peg, and allow other currencies to fluctuate freely.
Last year, garment exports to the United States fell in absolute terms.
Pressure is also coming to the exchange rate from losses run by the pe