After a wild start of 41.60-42.00, the rupee attained some stability following dollar sales by the SBI at 41.50 levels in the early hours and then at 41.69-41.73 in the afternoon. The RBI issued the statement at 9 am. "But for the SBI's efforts, the 42 level would have been breached because the sentiment remains bearish, stemming from uncertainty about future dollar inflows," said Mecklai and Mecklai senior vice-president KN Dey.

A private bank dealer said that the rupee weakened by mid-morning as against the forward dollar as dollar-buying sentiment was sparkedoff once again following nervousness over Pakistan's nuclear tests. Late afternoon trading saw a few exporters selling forwards, expressing confidence in the current levels, he added. However, there was no significant rise in corporate demand.

IndusInd Bank vice president Moses Harding said: "Today was a well-controlled market, with the RBI reinforcing the corporates' confidence in the Indian currency. But fears of rupee weakening further were quite evident. Small corporates with open positions and importers with unhedged import liabilities were active in the market, whereas bigger players and exporters preferred to adopt a wait-and-watch attitude." The rupee slipped to a new low after the SBI retreated from the market, he added.

The inter-bank activity was subdued in forward and spot markets for the whole day as sanctions and their adverse impact on infrastructure financing and foreign-exchange borrowings, among other things, loomed large on the corporate psyche, the chief dealer in a private bank said."The exporters are holding back their receivables and delaying their documentation, hoping to profit from further weakening of the spot rupee," said Dey and added that in case the RBI is able to maintain a stable rupee, even with a 10 paise spread, for at least three days, exporters will jump in and we might see the bearish sentiment dying down.

On the same note, Moses Harding cautioned that in case the exporters do not enter the markets, a major reaction may very well become imminent, sending the forex markets into another spin, otherwise anything beyond 42.50 to a dollar is not expected. Referring to the sanctions against Pakistan, Moses Harding said that with forex reserves just enough to finance a few weeks' imports, the only way to prevent a devaluation was to take some very drastic measures. "Though devaluation of the Pakistani currency is not on the cards, as a precautionary measure, the Pakistani authorities have closed all banks and asked all its authorised dealers to surrender their entireholdings of US dollars," he added.