Mumbai: The rupee rose to a 9-year high at 39.88/89 against the dollar, gaining 32 paise over the previous day''s close of 40.20 to the dollar.

This is the Indian currency''s first move over 40 against the greenback since May 1998.

The rupee opened stronger in the interbank foreign exchange (Forex) market at 40.03/05 per dollar, up from yesterday''s close of 40.20/21 per dollar. It later rose past the 40-mark to a high of 39.87 a dollar before ending at 39.88/89 a dollar, a sharp rise of 32 paise over previous close. It has gained nearly 67 paise in the last three days.

Banks readily sold dollar at Rs40.05-40.08 levels with not much of a support coming from RBI. It went down all the way to Rs39.88/89 for the dollar.

The rupee''s rise was also aided by the sharp cut in US interest rate, which widened the difference in interest yields with high-yielding currencies like the rupee. Foreign investors would now prefer to invest in these high-yielding assets rather than low-yielding ones, said a forex dealer.

The Reserve Bank stepped in to stem the tide. That brought the dollar again above Rs40. But there was significant selling at that level. With huge inflows from FIIs and exporter remittances, dollar supply seemed to surge.

Analysts expect the RBI to follow a wait-and-watch policy since the dollar is falling against most major currencies, including Asian currencies.

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