More than 100 rebels were wounded in the close-quarter fighting in the early hours of the morning, the minister told reporters here.

The attack on the northern peninsula, where hundreds have died in a week of fierce fighting, came a day after President Mahinda Rajapakse said the door was still open for peace talks with rebels fighting for autonomy for the nation's Tamil minority.

Fighting also erupted in the eastern coastal town of Trincomalee, with foreign ceasefire monitors saying they were forced to retreat from heavy overnight shelling.

In Jaffna, the Liberation Tigers of Tamil Eelam (LTTE) launched a seaborne attack on army bunkers at Kilali on the peninsula's southwestern edge but troops hit back with rockets and rocket-propelled grenades, officials said.

"The fight lasted until morning and Sri Lankan forces have been able to inflict heavy causalities on the Tigers," said Yapa. "We have recovered 98 Tiger bodies and destroyed three LTTE boats."

Yapa gave no soldier casualty figures. But military officials who wished to remain unnamed said at least six soldiers were killed and 60 wounded in the intense battle.

The defence ministry said before the latest assault that 250 rebels had been killed since the latest upsurge in violence on Friday in Jaffna. Military sources said some 150 troops had also been killed and 300 wounded.

There was no immediate reaction from the guerrillas to the military claims but the rebels said their losses in the first two days since launching an attempt to overrun military positions totalled only 22 dead.

Both sides are regularly accused of exaggerating the losses of their opponents.

The Jaffna peninsula is cut off from the rest of Sri Lanka by Tiger-held territory.

The military is forced to resupply its troops in the northern tip of the island by air and by sea from the port of Trincomalee, which was itself the scene of overnight fighting.

"We had to move our base from Trincomalee. The area where we were staying came under heavy fire, our accommodation was almost hit," said Thorfinnur Omarsson, spokesman for the Sri Lanka Monitoring Mission (SLMM).

Trincomalee is home to one of six district offices run by the SLMM in northern and eastern Sri Lanka. Omarsson said the monitors moved Thursday some 50 kilometres away (31 miles) away to try to continue their work in the area.

President Mahinda Rajapakse told newspaper editors Wednesday the government was ready for talks with the rebels but stressed soldiers would take defensive action if necessary.

Palitha Kohona, a senior adviser to Rajapakse and head of the peace coordinating agency, told AFP Thursday the government was ready to negotiate "any time, any place".

"What we are doing is just resisting LTTE attacks in areas which have been under government control pursuant to the ceasefire agreement of 2002."

The SLMM has said the February 2002 ceasefire, however, "exists only on paper."

Security forces remained on alert elsewhere, three days after a Pakistani diplomat escaped a deadly bomb attack in Colombo.

Schools were closed while government and military installations were closely watched.

There were fears the Tigers could stage retaliatory attacks after an air raid Monday, which the rebels said killed 61 school children in a rebel-controlled area in the north.

South Africa's cricket team, playing a tri-series here with Sri Lanka and India, also announced they were pulling out despite a guarantee of presidential-level security.

The Sri Lankan team practised Thursday guarded by troops ahead of the first of three matches with India starting Friday.

Both the rebels and the government have blamed each other for the upsurge in fighting which has claimed more than 1,500 lives by official count and displaced 135,000 civilians since since December.

More than 60,000 people have died in three decades of Tiger insurgency.