MUMBAI, July 11: The rupee staged a strong rally and breached the psychological barrier of Rs 35.70 against the US dollar forcing the Reserve Bank of India (RBI) to intervene in the inter-bank foreign exchange market here on Friday.

When the rupee showed signs of sharp appreciation, the RBI mopped up around $ 75 million at the Rs 35.69 level and prevented the upward march of the Indian currency. Opening at a seven-month low of Rs 35.72/73, the rupee was driven up by pure sentiments to breach the Rs 35.70 level to reach Rs 35.69 against the greenback. "The spot rupee reacted as there was steady flow of dollars and banks holding on to dollars began selling dollars thinking that the apex bank will not prevent the rupee from appreciating," a dealer with a foreign bank said.

The heavy inflow of the dollar through various channels is continuing. The RBI's absence from the forex market on Thursday triggered speculation on whether the central bank would check the rupee's gains or let market forces determine the rate. There were reports that the RBI had decided not to intervene unless there was an "extreme provocation". The decision was made after a meeting between RBI chief and Finance Minister last Saturday.

The RBI through its 15 minute intervention in mid-afternoon trades mopped up $ 75 million.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.