MUMBAI, Dec 4: The rupee recovered strongly by almost 36 paise to close at Rs 38.92/94 against the US dollar despite the dissolution of Lok Sabha leading to mid-term polls.The recovery is mainly attributed to the stern warning of RBI Governor Bimal Jalan to the speculators and the package announced on Tuesday to suck excess liquidity from the forex markets. The strong recovery from the overnight finish of Rs 39.28/32 was also due to fresh sales of dollars by exporters and the successful launch of the GDR issue by MTNL.The rupee - which has fallen about nine percent since August - opened at Rs 39.19/24 to the dollar and strengthened to 38.08/18 in the morning following the RBI decision to raise the interest rate at its fixed rate repo to 6.5 per cent from 5.0 per cent. The successful GDR issue of MTNL also buoyed the sentiment in favour of the rupee, dealers said.The RBI's decision to hike the repo rate was aimed at squeezing domestic liquidity to prevent diversion of cheap rupee funds to feed speculation in the foreign exchange market. Its decision to restrict corporate dollar purchases to orders backed by underlying trade demand reduced dollar demand, dealers said. Several exporters sold dollars today after they saw RBI's determination to prevent a further rupee fall.
