Heavy dollar selling by foreign banks led the spot rupee to close at a high of 39.31/32 to a dollar after opening at 39.37/38 on Friday.
According to dealers, the spot rupee would have reached higher but for the continuous Reserve Bank of India intervention in the foreign exchange market.
Dealers explained that the RBI was buying dollars in the spot market and selling it in the forward market with an underlying agreement to buy it back at a future date.
This way, it is postponing the infusion of rupee liquidity from the market. The spot rupee opened higher at 39.37 following dollar inflows after closing on Thursday at 39.40. The dollar inflows were part of portfolio investments and private equity investments.
The RBI intervention pushed up the rupee premia to be paid for booking forward dollars.
Annualised premia for six month and one year forward dollars closed at 1.82 per cent and 1.38 per cent as against 1.61 per cent and 1.24 per cent on Thursday.
Dealers explained that the premia on forward dollars went up because of the RBI move.
Meanwhile, RBI had announced the auction of government bonds as part of the borrowing programme to mop up the excess liquidity from the system.
The auction of bonds worth Rs 10,000 crore will be held on January 11.
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