The rupee closed at a 13-month peak on Wednesday, helped by higher-than-usual dollar inflows, the US unit's global weakness and the view that the Reserve Bank of India was not averse to a further appreciation.

The Indian unit closed at 47.90/91 per dollar, a level it had last closed at on December 24, 2001.

It notched gains of 0.07 per cent over the previous day's close of 47.94/95, extending its appreciation so far in calendar 2003 to 0.14 per cent.

"The dollar was offered through the day because of its fall against major currencies, two days' inflows and some inter-bank players going short to earn the weekend differential," said a trader with a foreign bank.

Traders were not unnerved by gathering war clouds over Iraq as they did not expect to feel the heat locally until hostilities actually broke out.

The dollar continued to be undermined by prospects of a US military strike on Iraq on Wednesday, falling to a three-year low against the euro for a fifth successive day in European trade.

"Consequently, traders feel the central bank will not be too bothered about the rupee's rise and will intervene only to smoothen volatility," said a trader with a state-run bank.

Wednesday's dollar inflows were higher than usual, having piled up on account of Monday's holiday in the United States.

Many traders also sold the US currency in the spot market, intending to buy it back on Thursday.

Wednesday's spot deals will be settled on Friday, while Thursday's will be settled on Monday, which will allow those traders to earn the higher interest rate on rupees over the weekend.

The rupee appreciated in 2002 for the first time in a decade because of robust trade remittances and other inflows, the dollar's global decline and a fall in the difference in inflation rates in India and that of its leading trade partners.

A weaker dollar and low domestic inflation have allowed the rupee to appreciate without hurting India's export competitiveness.