(Reuters) - Sri Lankan shares rose for the third straight session on Thursday to a 12-week closing high, as investors bought diversified and telecom stocks ahead of a key policy rates announcement later in the day.

** Sri Lanka’s central bank is expected to leave its key interest rates unchanged on Thursday, a Reuters poll showed, after cutting them in May to support the economy as tourism and investment plummeted in the wake of Easter Sunday bombings.

** The benchmark stock index hit its highest close since April 18 on Wednesday, buoyed by the government’s decision to launch a $2.2 billion Japan-funded Light Railway Transit (LRT) project and some other stalled infrastructure projects, brokers said. ** The index ended up 0.71% at 5,561.28. It rose 2.67% last week, notching its second consecutive weekly gain. However, it is down 8.11% so far this year. ** Shares in conglomerate John Keells Holdings Plc jumped 3.42%, LOLC Holdings Plc ended 5.92% firmer, Sri Lanka Telecom Plc closed up 6.33% and Dialog Axiata Plc rose 3.23%. ** Stock market turnover was 523 million rupees ($2.98 million), slightly below this year’s daily average of about 542.2 million rupees. Last year’s daily average came in at 834 million rupees. ** Foreign investors sold a net 44.8 million rupees worth of shares on Thursday, extending the year-to-date net foreign outflow to 7.29 billion rupees, index data showed. ** The government’s launch of central highway and light railway projects helped lift hopes that the country’s transformation would result in a faster economic growth rate, stockbrokers said. ** Sri Lanka is unlikely to hit its full-year economic growth target of 3-4% following Easter Sunday bombings and a Reuters poll has forecast growth to slump to its lowest in nearly two decades this year. ** Meanwhile, the currency closed firmer at 175.35/45 per dollar, compared with Wednesday’s close of 175.50/60, as dollar sales by banks surpassed importer greenback demand. The rupee rose 0.17% last week, and is up 4.13% so far this year. ** The rupee dropped 16% in 2018 and was one of the worst-performing currencies in Asia. ** The island nation raised $2 billion via 5-year and 10-year sovereign bond sales last month, tapping global capital markets for the second time in three months. ** Foreign investors sold a net 3.93 billion rupees worth of government securities in the week ended July 3, extending the year-to-date net foreign outflow to 22.4 billion rupees, the central bank data showed. ** The central bank cut its key interest rates on May 31 to support a faltering economy as overall business and consumer confidence slumped following deadly bomb attacks in April.