The Indian unit touched an intra-day low of 43.66/6650, its weakest level since August 1998, when it touched 43.70. The rupee surpassed its previous lowest level of 43.61 recorded in September last year.

The SBI, which pushed the rupee down, came to its rescue by the close and helped the currency to close at 43.605/615. Rupee lost over 3 paise over the Friday's 43.5725/50.

Forward dollar premiums tracked the spot rate. The six-month annualised premiums were quoted at 3.19 per cent, off an earlier high of 3.25 and higher than Friday's close of 3.13.

Opening at 43.58/59, the rupee came under intense pressure when SBI started bidding at 43.5950/60 levels. Dollar demand from the country's largest financial intermediary for servicing import bill of oil companies set the alarm bells ringing. In no time,other banks were covering unhedged positions anticipating the rupee to weaken further.

"Heavy dollar buying by SBI clashed with the customary month-end demand," Corporation Bank's chief forex dealer Shivananda Hebbar said, adding: "Many importers had left their positions uncovered anticipating the rupee to remain stable during the current month". Dealers said this complacent attitude triggered a panic reaction among importers, who were desperately ran for cover.

SBI sold dollars in the afternoon which allowed the rupee to recover some lost ground end at 43.61/615, showing a net loss of four paise over Friday's closing levels of 43.57/575.

The rupee's decline highlighted the impact of the rising oil import bill. "The overall scenario in the market was dominated by dollar demand to meet oil imports. Reports of oil prices touching their highest levels since the Gulf War in 1991 fuelled the demand," said Sharad D Pawar, senior consultant with e-Mecklai, a leading forex brokerage.

Oil markets rose afterOPEC countries like Iran, Libya and Algeria urged the grouping to prolong deep output cuts for another six months with the Brent benchmark crude for March jumping to $27.11 a barrel, its highest since the Gulf War.

"The Diamond Trading Corporation and a large corporate were buying heavily during the session," a dealer said.

Press reports quoting Pakistan's chief executive Gen Pervez Musharraf as "warning" India against crossing the line of control in Jammu & Kashmir did affect sentiments. Dealers, however, did not see a link between the statement and the rupee's fall.

"It will be surprising to see the rupee depreciate beyond Monday's low levels. There will of course be month-end demand as just four working days remain for players to cover positions," Gautam Ashra of forex brokerage Kanji Pitambar & Co. said.

"The rupee is technically overvalued. There would be a gradual depreciation and the currency may cross the 44 mark in the coming months, with 43.60 acting as the floor," PH Ramaswamy, executivevice-president & country treasurer with French bank Credit Lyonnies said.

According to dealers dollar inflows have been slow this month and net ouflows has had its effect on the rupee. Foreign institutional investors (FIIs) were net sellers $76.1 million in the stockmarkets during January 1-21.