The six-month annualised forward-cover fell to 6.9 per cent. It staged a smart rally later on and closed at 6.5 per cent.

The Reserve Bank of India fixed its reference rate for the greenback at Rs 39.65, 14 paise lower than its previous peg of Rs 39.51.

In the spot market, State Bank reportedly bought close to $140 million. State Bank, dealers said, purchased the greenback at Rs 39.57 and later at Rs 39.60-levels. The dollar's high for the day was Rs 39.67, while its low was at Rs 39.55. Most of the trades were struck in the Rs 39.60-39.65 range.

Inter-bank dealers said State Bank was picking up greenbacks for its corporate clientsahead of the holidays. "Calcutta is open on April 9. Most banks have their central dealing rooms in Mumbai, which is closed on that day. Corporates are also off on April 12, Sunday, though banks are not," said a dealer with a European bank here.

The forward premiums were seen weaker by 5-7 paise at the start of trades, but recovered by close. September premiums, seen weaker at 129/132 paise in early trades, quoted 123/128 paise at finish. The six-month annualised forward-cover went at 6.9 per cent at a point of time, but rallied to close at 6.5 per cent.

"The rupee came off its weaker levels to close at 39.53. With demand for spot-dollars tapering off by the close of trades, the forwards went pinker. The six-month annualised forward-cover finished the day at 6.5 per cent," said a dealer with a brokerage.

Substantial outflows on account of the Rs 4,000 crore five-year gilt (11.10 per cent) auction held on Monday, a 7 per cent four-day fixed-rate repo on Tuesday and another Rs 4,000-crore eight-yearauction on April 15 made the inter-bank market jittery.