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COLOMBO, May 8 (Reuters) - Sri Lankan shares extended gains into a third session on Monday, posting their highest close in nearly one year, with blue chips leading the rise ahead of the central bank's monetary policy rate announcement.
Volume was moderate as many investors were on the sidelines ahead of holidays. The financial markets will be closed on Wednesday and Thursday for Buddhist religious holidays.
With pressure on the rupee abating and yields for government securities easing, the central bank is likely to keep key interest rates steady at more than three-year highs at a policy meeting on Tuesday, a Reuters poll showed.
The Colombo stock index ended 0.4 percent firmer at 6,667.46, its highest close since May 18, 2016. It added 0.5 percent last week, its sixth straight weekly gain.
"It is really a short week and investors are not there," said Prashan Fernando, CEO at Acuity Stockbrokers.
"The whole week is going to see thin volume due to the holidays."
Turnover stood at 767.5 million rupees ($5.04 million), less than this year's daily average of 899 million rupees.
Foreign investors net bought shares worth 137.9 million rupees, extending their year-to-date investment in equities to 16.74 billion rupees.
They bought a net 14.25 billion rupees in the last 31 sessions, and out of these, the bourse saw net foreign buying in 30.
Reduction in t-bill yields, stable currency on expectation of inflows from foreign borrowing, an IMF statement on the disbursement of the third tranche of $1.5 billion loan, and lower-than-expected yield for a $1.5 billion sovereign bond last week have helped boost sentiment, analysts said., ,
Conglomerate John Keells Holdings Plc rose 0.5 percent, Hatton National Bank Plc ended 0.5 percent firmer, and Commercial Bank of Ceylon Plc climbed 0.3 percent. ($1 = 152.1500 Sri Lankan rupees) (Reporting by Shihar Aneez and Ranga Sirilal; Editing by Subhranshu Sahu)