Dealers attributed the rupee's fall to below 43 to massive dollar purchases by a major corporate which had a chain reaction on other market participants who also bought the greenback. A spillover of the regional turmoil had weakened the rupee in the overseas non-deliverable forward (NDF) market which, in turn, impacted the currency locally, they said.

"With spreads widening between the onshore and offshore markets, some large private sector companies entered the market to cash in on the arbitrage benefits," dealers said.

The RBI is reported to havepumped in between $75 million and $100 million to prop up the rupee after panic gripped the market. RBI officials admitted that the apex bank pumped in dollars in the spot market but refused to quantify the amount. There was also "verbal" intervention by the Reserve Bank. "Initially they (RBI) asked for prices," said a dealer adding "later, they sold spot dollars."

Forward premiums went up tracking a weaker spot rupee and slightly firmer call rates at 7 per cent. The six-month annualised forward cover closed at 9.02 per cent, higher from Tuesday's finish at 8.20 per cent while the one-year went at 9.58 per cent (9.02 per cent).

Opening the day at 42.92/93, a shade weaker from its overnight close at 42.86, the rupee went lower to 42.95/98 levels soon thereafter. The SBI sold dollars at this point, helping the rupee recover to 42.84, "but the respite was shortlived," said Mecklai Financial Services senior vice-president KN Dey.

Renewed corporate dollar demand at 42.84 saw the rupee cross the 43 barrier.The rupee hit its all-time low of 42.35 immediately, but not before Reserve Bank's intervention.

In the forwards, the one-month annualised forward premium closed at 8.11 per cent compared to its overnight quote at 5.64 per cent, two months at 8.71 per cent (6.59 per cent) and three months at 8.99 per cent (7.27 per cent).

ING Bank's treasury head Atul Sahasrabuddhe said: "There was quite a bit of panic in the market... News of another round of currency devaluation in the Asian region seems to have upset sentiment."

According to Standard Chartered Bank's chief forex dealer Sharukh Wadia: "While other Asian currencies gained today, the market's mood indicates a weaker rupee."

Against the dollar, the Japanese yen quoted 145.10 (147), Korean won at 1,330 (1,340), Malaysian ringgit at 417 (426) and Singapore dollar at 71.50 (73).

Chinese ambassador to India Zhou Gang's statement today - that it will be forced to devalue its currency (yuan) if the Japanese yen and other south-east Asian currenciescontinued their free fall - gave a fillip to the bearish view on the rupee. Added to this was political uncertainty in the wake of AIDMK supremo J Jayalalitha's threat of withdrawing support to the BJP-led government at the centre, dealers said.

INSIGHT
Timely intervention

Reports indicate that a large oil company remittance had sucked dollars out of the market, and banks were intent on rebuilding their dollar positions, which led to the pressure on the rupee. RBI intervention was expected once the dollar crossed the Rs 43 mark, and the intervention was timely and effective, as the RBI supplied as many dollars as the market wanted.

RBI action has always been to avoid a precipitate fall in the value of the rupee, and today's intervention is further proof that this is the strategy being followed. But everytime the yen weakens, confidence in the rupee holding its own will continue to be shaken.