The rupee closed at yet another new low of 41.65/70, losing 30 paise during the day. The central bank also made it clear that it will not hesitate to take any action "as may be necessary to ensure continued orderly conditions" in the forex market. The six-month annualised forward premiums, which shot up 9.50 per cent during the day, closed at 9.11 per cent, up from its previous close of 8.61 per cent. The RBI reportedly told banks not to go long on dollars after the rupee closed at 41.90 on kerb yesterday. It opened wide at 41.60/42.00 as nervousness gripped the market on Pakistan's nuclear tests on Thursday, prompting the central bank into action.

An RBI spokesperson, however, denied any such move. A few bankers and forex brokers, however, confirmed that the central bank did "advise" them not to go long on dollars.Large banks like the State Bank of India, Canara Bank and a few foreign banks often go long on dollars to meet corporate demand. Dealers said the RBI advised banks that they can go long to meet corporate demand but not inter-bank demand.

According to Sinha, between March 19 -- when the BJP government took over and until yesterday -- there has been a 4.23 per cent fall in the value of rupee. By closing at 41.65/70 on Friday, the rupee has, however, registered a 5.2 per cent depreciation since the government took over.

After opening at 41.60/42.00, the quotes narrowed down as trades took place at 41.41/50. The State Bank intervened on behalf of the central bank and sold dollars to prop up the rupee. The rupee sank on genuine importer buying to close at an all-time low of 41.65/70. The annualised premium on six-month dollar rose to 9.11 per cent by early morning and went up further during the day to 9.50 per cent, after opening at 8.80 per cent, up from its previous close of 8.61 per cent.

"There is onlydemand for dollars," a foreign bank dealer said. State Bank, however, was in the market to sell dollars, which saw the forwards gain marginally to close at 9.10 per cent. Dealers said the undertone was bearish towards the rupee as the market remained uncertain about future dollar supplies.

Immediately after the market opened, the RBI issued a statement saying the nuclear tests conducted by Pakistan have "no financial implication for us. Financial markets are expected to continue to function normally. The finance minister said: "The government's policy is to maintain orderly conditions in the currency market."