On Tuesday, the Indian currency had touched an all-time low of 43.06 against the dollar.

The $540-million World Bank loan is the first instance of such an assitance cleared for the state under the social and rural category since the clampdown of the US sanctions against India in the wake of the series of nuclear tests conducted in May. The market has perceived the clearance of the World Bank loan as a postive sign which will boost the sagging rupee.

The State Bank of India's late dollar selling in a lacklustre forex marketalso led to the appreciation of the rupee. The rupee opened at 42.72/74, but soon weakened by 5 paise on speculative demand. However, exporters' dollar selling and import cancellations led to the strengthening of the Indian unit to 42.70/72.

The rupee finally closed at 42.62/64, registering a gain of 10 paise over the previous day's close. The market was very quiet and there was little dollar demand, which was met equally with dollar selling by exporters. Cash/spot business was done between 3 to 4 paise premium, dealers said.

The forward premiums remained steady, tracking the spot rupee. The six-month (annualised) forward premiums remained at the previous level -- 11 per cent. Dealers said that paying pressure was limited and was taken care of by importer cancellations and inter-bank receiving of premiums, they said.

"We expected some paying pressure to develop in the morning.... There is some $900 million worth of roll-over to be done... Maybe, premiums will come under pressure later in the day," aprivate bank dealer said. The one-month (annualised) forward eased marginally to close at 11.55 per cent (11.70 per cent) and the one-year forward closed at 10.68 per cent (10.70 per cent).