MUMBAI, Dec 16: The Reserve Bank of India (RBI)-State Bank of India (SBI) combination pumped in an estimated $350 million in the spot market to prop up the rupee after it had touched a historic low of 39.93 on Tuesday. The currency's previous all-time low was 39.90, recorded on December 2.

This is the first time since the four-pronged rupee-support package was announced a fortnight back the apex bank intervened in the spot market. The rupee, which strengthened to 39.35 on the back of aggressive intervention in a thin market, finally closed at 39.39/42.

With Tuesday's RBI intervention -- estimated at $250 million -- the central bank's efforts to stem the currency's slide has drained an estimated $3 billion in foreign-exchange reserves. "The signal is clear: the Reserve Bank does not want the rupee to touch 40 and the current level -- 39.35 to 39.55 -- is reasonable," a dealer said.

Ironically, it was RBI governor Bimal Jalan's statement the prevailing exchange rate was "reasonable", that triggered Tuesday's fall of the rupee. It came perilously close to the 40 level on frenzied inter-bank activity, minutes after the market opened in the morning. Jalan's statement sent out "mixed" signals to the market as he refused to fix any band and defend the currency at any particular level, despite describing the current one as "reasonable". "The market wanted to test the governor's intention," a dealer with a private bank said.

Opening at 39.73/80 level, the rupee quickly weakened to touch an all-time low of 39.93 before the RBI came and sold dollars at 39.80-90 level. This saw the rupee recover sharply to trade at 39.55/60. "The RBI intervened twice or thrice, and this triggered the rupee rally which recovered some lost ground sharply," the dealer said. "The RBI has tried to comfort sentiments through Tuesday's intervention," a dealer with a foreign bank said. He said there was still a huge underlying demand for dollars and the rupee might once again start weakening on Thursday.

Dealers said RBI and SBI sold dollars only to nationalised banks. "The entire $350 million has been sold to nationalised banks. No foreign bank was involved," a dealer with an European bank said. Dealers attributed their move to nationalised banks generally avoiding speculation and warehousing their positions."The SBI sold a large amount of dollars and it has done so with the tacit understanding of the RBI," a dealer at a private bank said.

The rupee immediately appreciated to 39.35.The forward rates went up and six-month premia (annualised) closed at 9.7 per cent - about 40 basis points higher than Monday's close of 9.30 per cent. Dealers said they expected the forward premia to rise as importers were still covering. One-month forwards closed at 11 per cent.