The rupee was devalued 3 percent on Nov. 22, since then, the Central Bank has sold around $490 million to defend the currency at 113.90 a dollar after selling over $2 billion for the same purpose through the end of September as it maintained a no-depreciation policy , Reuters said.

"We can sustain it for any length, because we know that inflows are coming in and we don't see a reason to stop the intervention," says the Governor.

The International Monetary Fund (IMF) welcomed the devaluation as "a step in the right direction".

The Central Bank Governor firmly believes a $1 billion coming in from commercial banks' short-term overseas borrowings, expatriate worker remittances, tourism revenue and the government's long-term foreign debts will keep the reserves healthy.

"Those inflows are enough for intervention. We don't want the rupee to be fluctuating all the time. We are not allowing volatility or panic," Cabraal said.

"The Central Bank's job is to maintain stability and not to maintain the foreign exchange rate at market price. We are doing that. I don't know why people have to question that," he added.

"These are the reserves we built up deliberately to use on an occasion like this," Cabraal said.

The bank has increased the limit on foreign holdings in government securities to 12.5 percent from 10 percent, while it has relaxed strict regulations on corporate borrowing and debentures to increase inflows.

The Governor said the preliminary data had showed Sri Lanka's economy had expanded more than 8 percent in the third quarter, while recent interest rate spikes of 92-147 basis points on T-bills were a market-driven correction.

"At the moment we think there is no necessity to intervene in the interest rate and the increase is, we think, a right correction," the Governor further said.