Re bounces back to 41.3

The rupee faced its biggest weekly fall since May 2004 on continued selling of equities by foreign funds, particularly hedge funds, on fears the credit squeeze in the US would spread.

However, the rupee closed today at 41.33 per dollar, up from 41.36 yesterday after recovering from a low of 41.74 in intra-day trade on concerns the sub-prime woes could also hit US insurance companies after banks and hedge funds.

The US Federal Reserve's decision to cut the rate at which it lends to banks is expected to be supportive of the rupee, which otherwise was seen falling below 42 per dollar early next week.

"If the markets recover and selling by exporters continues, the rupee may even open higher at 41.10 on Tuesday," said RVS Sridhar, head, markets, at Axis Bank. Financial markets are closed on Monday on account of the Parsi new year.

Dealers said the Fed's decision might check the sell-off of Indian equities by foreign funds, which have been liquidating equity assets to generate dollar liquidity.

The call rate "" that at which banks borrow from each other for a day "" closed at 11 per cent after an intra-day high of 15 per cent, against 6.10 per cent yesterday.

The call rate rose as banks borrowed to meet regulatory reporting requirements. The yield on the ten-year government bond closed at 7.99 per cent against 8.04 per cent yesterday.