The central bank governor on Friday said the rupee is on an appreciation trend and the monetary authority would manage any volatility through intervention.
However, dealers said the local currency was under downward pressure as imports continue to rise in a stable exchange rate regime and a low interest rate environment.
The spot currency was trading steady at 130.95/131.10 per dollar at 0657 GMT compared with Friday's close.
Dealers said banks traded the spot at 130.95 as the central bank defended the currency at that level through moral suasion. Three-day forwards, or spot-next, also capped at 131.10, traded at 131.10/14 per dollar compared with Friday's close of 131.10/12.
Dealers said the central bank's capping of the spot and spot-next forced banks to trade in four-day forwards, which traded at 131.10/18, weaker from Friday's close of 131.10/12.
The market expects the local currency to remain weak due to rising seasonal imports, at least through November and only start to inch up in December on remittances, dealers said.
Dealers expect the currency to gain in December on expected inflows from remittances ahead of Christmas.
Overseas investors sold a net 39.54 billion rupees ($302 million) worth of government securities in the eight weeks through Nov. 12, data from the central bank showed.
Sri Lanka's stock index was up 0.3 percent, or 22.65 points, at 7,523.74 at 0715 GMT.
Turnover was 1.7 billion rupees ($12.98 million), with 118 million shares changing hands.