One separatist was killed when troops returned fire, the army said on Monday. "Near a village, troops on foot saw a vehicle parked by the side of the road and went to investigate," an army spokesman said.

"Some Tamil Tigers hiding in a bush fired on them. One soldier was killed. Our soldiers retaliated and one Tamil Tiger was killed." 

A spokesman said later that a second corpse had been discovered, along with three weapons.

In a second overnight incident, three soldiers were wounded after separatists fired at an army truck with small arms, he said.

Both attacks took place near the northeastern port of Trincomalee, which is almost encircled by Tiger positions. 

On Saturday, a Sri Lankan navy Dvora fast attack boat exploded off Trincomalee. Two survivors said the vessel had been rammed by a Tiger suicide boat, and an ongoing search has failed to find traces of the 13 missing crew. 

Stock market falls

Attacks on troops have increased markedly since the beginning of December and the authorities have blamed the Liberation Tigers of Tamil Eelam (LTTE), but the group has denied responsibility.

Sri Lanka's stock market has fallen with every attack over fears of a return to war as a truce agreed to in 2002 seems near collapse.

Peace talks

Mahinda Rajapakse, the Sri Lankan president, said the recent violence would not deter him from trying to resume peace talks with the guerrillas, state-run media reported.

Rajapakse says he is still keen to
pursue peace talks

"It is a great mistake if anyone believes that our decisions can be altered by means of terror," President Rajapakse was quoted as saying by the state-run Daily News.

"Even today I would like to tell the people that we are still ready and committed to solve this problem in a peaceful manner by demonstrating our patience."

But the president, who took office in November, said: "The LTTE should realise that we are not deaf and blind. If someone takes my patience that I have inculcated through Buddhist values as my weakness, they would be mistaken."

The Tigers began fighting in 1983 for a homeland for Sri
Lanka's 3.2 million ethnic minority Tamils, claiming discrimination by the majority Sinhalese, who number about 14 million.