The rupee lost 13 paise in volatile trading, characterised by bouts ofdollar-selling by the State Bank of India (SBI) and other state-run banks.Dealers said Wednesday's fall was a reflection of shaky sentiments amongplayers, which emerged in the previous session, when the currency hadpierced the psychologically crucial 44-mark.

The rupee opened at 44.04/06, weaker from its previous close of 44.02/03.Dealers said sentiments were bearish from the start as the rupee crossed itsprevious all-time low to touch 44.10/12 within minutes of trading. The lasttime the rupee touched a historic low was on May 10, when it fell to44.05/07.

At this point, SBI entered the market to sell dollars, which allowed therupee to climb up marginally to 44.08/09. However, dollar demand re-emerged,with corporates and importers buying in anticipation of a further fall inthe rupee's value. The rupee hovered around 44.11/12 in early afternoontrade, but weakened to 43.13/14 in the closing hours. Sustained demand,coupled with short-covering by banks, saw the rupee fall to an all-time lowat the end of trading.

"The next two to three days may witness more corporate demand. The ReserveBank of India (RBI) is not keen on the rupee going into a free fall, whichis evident in intermittent dollar sales by SBI," eMecklai seniorvice-president KN Dey said.SBI is regarded by the market as a "proxy" forthe RBI, as it, along with a clutch of other public-sector banks, buys/sellsdollars on behalf of the central bank."The first half-an-hour of tradingwill be decisive. In case the dollar outflows on behalf of foreigninstitutional investors (FIIs) pick up more momentum, the rupee may fall to44.20/25 in the next two days," Dey said.

Others feel the central bank will not allow the rupee to depreciate beyondthe present levels. "The rupee is expected to bounce back to the 44.05levels if SBI and other large state-run banks continue dollar sales to calmsentiments," Essar group treasurer NS Paramshivan said.

"The rupee crossing the 44 barrier confirmed the feeling among marketmenthat this could no longer sustain as a support level," a senior dealer witha foreign bank said.

Dealers said most dollar infusion into the market were absorbed by foreignand private banks. Foreign banks, who usually transact deals on behalf offoreign funds, were buying a moderate amount of the greenback. May has seena net outflow of funds from FIIs, though the amount is negligible ascompared to net inflows of about $1.5 billion during the year.

According to the latest FII fund flow figures released by the Securities &Exchange Board of India, foreign funds have seen a net outflow of $121.6million. Of this, equities accounted for $11.5.3 million, and debt markets$6.3 million.

"The rupee is expected to weaken to 44.40/50 in the two days," CenturionBank country treasurer J Moses Harding said. "Looking at the rupeeweakening, exporters may postpone bringing back dollar proceeds," said Dey.