The rupee breached the key 47.9 per dollar mark to end Thursday at a new 13-month high, with the central bank refraining from absorbing robust inflows in view of the weak outlook for the US unit, dealers said.
The Indian unit closed at 47.895/905 per dollar, finishing above 47.9 for the first time since December 24, 2001. The rupee closed Wednesday at 47.91/92.
"Dollars came in from various sources, and although the supply was not that much, demand was muted," said a trader with a state-run bank.
"The outlook is positive. With the dollar weak and the rupee closing above the 47.90 mark, traders could take it as a signal that the rupee could rise further.
The rupee has now gained 0.16 per cent in 2003, after rising by 0.55 per cent in 2002 -- the Indian unit's first annual appreciation against the dollar in a decade.
The strengthening Indian rupee has benefited from strong trade and investment inflows as well as the dollar's weakness overseas. The dollar has recently been undermined by the prospects of a US-led military strike on Iraq.
Rupee premiums on the forward dollar, which have been easing in tandem with the rupee's gains, rose as some companies hedged recently renewed foreign currency loans and on profit-taking.
The annualised six-month premium closed at 3.23 per cent against the previous 3.14 per cent.
A drop in US money market rates and firm local rates had also pushed premiums higher, traders said.
Premiums mainly derive their value from the demand to hedge foreign currency exposures, but are also influenced by movements in Indian and American interest rates.
Money market rates in the United States fell on Wednesday as investors bought safe-haven US Treasuries due to fears of a war on Iraq.
Local money market rates have traded at around six per cent in recent sessions after the central bank's open market bond sales last week.
Before that, India's overnight funds rate has been trading at around the repo rate of 5.5 per cent under flush money conditions.
© 2026