After announcing a host of measures to arrest the rupee fall, the RBI pumped in about $100 million in the spot and forward market, sending out a clear signal to the market that it wants the rupee to stabilise.

At the inter-bank call money market, the rates shot up to 10 per cent on RBI's decision to hike the repo rate while gilt prices crashed in dull trading. The 11.55 per cent 2001 paper fell from Rs 100.06 to Rs 99.

The RBI raised the CRR by one percentage point and the repo rate by three percentage points besides allowing 15 per cent forward cover to FIIs on their existing equity investments as on June 11, in addition to the facility available for incremental investments.

The apex bank has also withdrawn the facility of rebooking cancelled forward contracts in respect of import transactions along with the facility of splitting the forward commitments into spot and forward legs. It also directed authorised dealers to report at the end of the day their open positions as at 10 a.m. and peak intra-day positions. These measures were followed up by the infusion of $100 million into the spot and forwards market.

The domestic currency's sharp recovery reversed a trend which has seen the rupee crumble by 1.4 per cent to a record low of 43.70. The bear run began after finance minister Yashwant Sinha said on Monday that global developments would put pressure on the rupee.

The forward rupee curve turned inverse once again. The month forward premium touched a high of 19.04 per cent. "The sudden rise in the forward premium is a knee-jerk reaction to the RBI measures. A lot of banks which were receiving have now started to pay which is driving the forward rates up," a dealer in a private bank said.

The six-month forward premium closed at 12.43 per cent (annualised) and the one-year premium closed at 11.5 per cent. With this the forward curve has once again turned inverse, clearly showing that the banks are rushing to cover in the short term after being caught short.