The rupee opened at 117.50/117.70 and fell to 117.60/117.90 levels by late afternoon trade, dealers said.
At the weekly Treasury bill auction, yields on three month bills fell by two basis points 12.20 percent, the six month by five basis points to 13.39 percent and the 12 month by five basis points to 13.73 percent.
From the 18.7 billion rupees worth bills offered to the market, 12.9 billion rupees worth of bills were accepted by the central bank at the auction.
In the stock market the All Share Price Index closed down 1.09 percent (20.64 points) to end at 1,867.98 while the Milanka index of liquid stocks closed up 2.02 percent (41.48 points) to end at 2,010.05, according to provisional stock exchange figures.
Turnover was 138.8 million rupees.
Analysts said investors were being cautious as the International Monetary Fund bailout package was getting delayed.
"Retail investors are taking defensive positions," said Geeth Balasuriya, manager research at Acuity Stockbrokers.
The share price of Janashakthi Insurance, whose business was suspended for three weeks by the Insurance Board of Sri Lanka, fell 12.5 percent or one rupee to close at 7.00.
"Looking at the gains in the market and the best performing counters one could notice that fundamentally strong counters such as JKH, NDB, and DFCC are dominating the bourse which is a healthy sign," said Thakshila Hulangamuwa of Asha Phillip Securities.
He said he expects the market to recover.
Conglomerate John Keells Holdings (JKH), which has interests in finance, transport, property development, food processing and retail sectors, contributed 33.00 million rupees to the day's turnover.
JKH lost 75 cents to close at 76.25.
Sri Lanka's largest privately held bank, Commercial Bank of Ceylon, lost 25 cents to close at 93.75, while Hatton National Bank, another privately held commercial bank, lost 2.00 rupees to close at 92.00.
Distilleries Company of Sri Lanka lost 2.25 rupees to close at 80.00.
Index heavy Dialog Telekom, a subsidiary of Telekom Malaysia, lost 25 cents to close at 5.00, while Chevron Lubricants, a subsidiary of US-based petroleum giant Chevron, lost 2.25 rupees to close at 115.00 on thin trade.
Eagle Insurance gained 9.75 rupees to close at 135.00 in thin trade after it struck a deal to divest its fund management unit to Capital Development & Investment Company, an investment company controlled by NDB Bank for 147.77 million rupees.