Sri Lanka's rupee currency fell over 3 percent to trade at a record low of 139.00 per dollar on Friday after the central bank effectively floated the currency by ceasing to quote its own reference rate.

The slide comes amid weakness in emerging markets triggered by a devaluation of the Chinese yuan. It came with a delay, though, after the central bank supported the rupee before and after a general election on Aug. 17 that was won by a pro-reform coalition.

The central bank's move came a day after it received $1.1 billion from a $1.5 billion swap agreement with the Reserve Bank of India (RBI).

"This correction is probably overdue by 2-3 months. They might have waited till the inflows come in from the RBI swap arrangement and reach political stability," said Shiran Fernando, an economist at Colombo-based Frontier Research.

The rupee was quoted between 136.50 and 139.00 per dollar from Thursday's close of 134.75, dealers said.

"I don't think it will go beyond 139.00 because the central bank will intervene to curb excess volatility and the market will correct by itself," one dealer said.

Sri Lanka's central bank had propped up the rupee around the election, at a time when regional peers were falling. The market had expected a correction after the polls won by the ruling United National Party.

In contrast, the Indian rupee has fallen around 3.9 percent, the Malaysian ringgit by 8 percent, while Indonesia's rupiah has fallen 4.5 percent since China devalued the yuan on Aug. 11.

The central bank usually directs the market through state banks trading the dollar. The rupee has fallen 5.6 percent so far this year against the U.S. currency.

The central bank told forex dealers at a meeting on Thursday that it would allow the rupee to float from Friday, according to sources aware of the meeting's proceedings. (Editing by Douglas Busvine and Simon Cameron-Moore)

Reuters