COLOMBO - Sri Lanka's shares hit a two month low on Tuesday, as investor appetite declined due to economic woes and protests ahead of polls, while the central bank's cautious flexibility drove the rupee to a six-month high.

The All-Share Price Index .CSE of the Colombo Stock Exchange fell 0.83 percent, or 23.92 points, to 2843.66, its lowest since Sept. 15.

The bourse has fallen 9.1 percent since the government said on Oct. 13 it will hold national elections by April.

Frequent protests and restive labour unions have dampened investor confidence, already on decline on worries of political uncertainty ahead of national polls.

Investors are also wary of a likely loss of a European Union trade concession that helped boost Sri Lanka's top export, garments. The EU has been considering to withdraw the concession over a rights abuse probe.

Worries of lower-than-expected corporate earnings and the arrest of one of Sri Lanka's main investors in a U.S. insider trading case in mid-October, have also hampered a market rise.

Shares in leading mobile phone operator Dialog Telekom fell 3.57 percent to 6.75 rupees a share, while fixed line telephone operator Sri Lanka Telecom closed 2.92 percent weaker at 41.50 rupees.

Conglomerate John Keells Holdings, which posted a 43 percent dip in net profit in the September quarter on October 29, closed flat at 137 rupees.

Turnover was 828.53 million rupees ($7.23 million), double last year's daily average of 464 million rupees.

With 89.2 percent return so far this year, the CSE is still one of the best performing bourses in Asia.

Sri Lanka rupee hit a fresh six month high on Tuesday as the central bank allowed a cautiously flexible exchange rate in managing the rupee against the U.S dollar.

A state bank, through which the central bank directs the market, lowered its dollar buying rate to 114.45 rupees, from Monday's 114.65, dealers said.

Monday's appreciation was the first rise since Aug. 17.

The rupee closed at 114.45/50, up from Monday's 114.65/70.

Sri Lanka central bank on Thursday said it will allow foreign currency outflows up to $500,000 for foreign investments without its approval with effect from December.

The interbank lending rate or call money rate CLIBOR edged up to 9.037 percent from Monday's 9.007 percent.

($1=114.45 Sri Lankan rupees) (Additional reporting by Shihar Aneez; Editing by Harish Nambiar)