The Reserve Bank of India pulled out a sledgehammer in the domestic foreign exchange market on Friday to quell a minor rebellion in the rupee/dollar rate.
 
As a result of the heavy RBI buying, the spot rupee closed at 46.0050/0100 to the dollar, against Thursday's close of Rs 45.95/$.
 
The rupee on Thursday breached the Rs 46/$ barrier to close at a near 35-month high of Rs 45.95/96 to the dollar on the back of robust foreign exchange inflows.
 
Market sources said the torrent of dollars was due to Infosys Technologies, which had recently raised dollars through American Depository Shares, remitting the proceeds home.
 
Dealers felt that the RBI intervention had sent a strong signal that it was comfortable with the rupee at 46 to a dollar, but not any lower.
 
The market believes that though the RBI may have absorbed this particular tranche on inflows, it cannot stop the rupee from appreciating gradually.
 
With the action concentrated in the spot market, the forward premiums closed in a tight range for the longer tenors and lower for near-term tenors.