The sops announced for exporters today have strengthened expectations that the rupee will appreciate further from the current 9-year high level, with some forecasts estimating that the Indian currency will rise to Rs 36-Rs 39.50 by the end of 2007.

The rupee closed 0.2 per cent down at Rs 40.49 to the dollar today, after touching a low of Rs 40.70 in intra-day trade.

The rupee has appreciated by over 8 per cent since the beginning of the year on robust capital inflows and due to the dollar weakening globally.

The RBI bought $24.7 billion of foreign currency between November 2006 and April 2007 to prevent a sharp appreciation of the rupee and simultaneously raised its overnight lending rate and the cash reserve ratio, the portion of cash banks need to deposit with it, to fight inflationary pressures.

"The export package is a direct intervention to protect the interests of exporters, which in turn reflects the helplessness of the Reserve Bank of India [Get Quote] on the rupee front," said Roopa Rege-Nitsure, chief economist at public sector lender Bank of Baroda [Get Quote].