The rupee, however, stabilised during the later part of trading, closing at the previous levels of 42.28/29 against the dollar. The State Bank of India sold dollars to stem the rupee's slide.

Opening at 42.31/32, the rupee traded at 42.33/34 levels just before mid-session but panic-buying among importers led the rupee to slide further. A few deals were struck at 42.42 levels.

"News of yet another downgrade triggered panic in the market as importers rushed to cover their positions by buying from the market, This saw the rupee weakening to 42.38/40," said a forex dealer with a private-sector bank. "Quotes were also seen at 42.40/42 against the dollar," dealers said. The State Bank sold dollars at 42.27-29, a dealerwith a foreign bank said.

Adequate supply of dollars along with the SBI support aided the rupee's rise towards the end of trade, which finally closed at 42.28/29.

"S&P's decision made a few participants rush to the market to buy dollars. However, later, enough supply on account of three holidays during this week supported the rupee's rise," said a dealer.

Cash/spot was quoted at 1.75-2.25 paise, tom/spot at 0.00-0.25 paise and cash/tom at 1.5-1.75 paise levels at the fag end of the day, indicating that the rupee will open stable on Monday.

Forward premiums across all maturities tracked the spot rupee and firmed up owing to paying pressure by importers when the rupee was hovering at 42.38/40 against the dollar. Near-term forward premiums firmed up by 2-3 paise and far-end went up by 5-6 paise compared with their previous close.

"Expectations of further weakening of the rupee saw importers covering at these levels," said forex dealers. The six-month annualised premium quoted at 8 per cent (7.25 percent), three months at 7.7 per cent (7.35 per cent) and one month at 5.7 per cent (7.10 per cent).