The rupee breached a psychological barrier of Rs 46/$ to close at a near 35-month high of 45.95/96 to the dollar on the back of robust foreign exchange inflows.

The rise was further accelerated in the absence of corporate and interbank demand for dollars, barring intervention by the state-owned banks on behalf of the Reserve Bank of India.

Dealers said Infosys Technologies, which had recently raised dollars though an issue of American depository shares, had remitted the proceeds home.

The rupee had last closed higher than Thursday's level on September 15, 2000, when it ended at 45.7750/78000. It has gained 4.4 per cent so far in 2003.

Dealers felt that the central bank did not come out with aggressive intervention like the last time a few weeks ago when it had almost touched Rs 46/$ in intra-day lows.

Market sources said the RB I was wary of intervening in the domestic foreign exchange market in order to avoid adding more rupee liquidity in the local money market.

The money market is awash with funds as evidenced in the record levels of Rs 25,000 crore (Rs 250 billion) bids received in the daily repo auctions.

Analysts, however, feel that the rupee, though now fairly valued on a real trade-weighted basis, will still continue to appreciate on strong trade and investment inflows.

Rupee premiums on the forward dollar, however, ended steady with the six-month and one-year forward premiums closing at 2.10 per cent and 2.05 per cent, respectively.