Mumbai, April 16: The rupee today breached the 42-mark against the dollar for the first time in nine years.

It shot up by 53 paise to end the day at 41.92 to the dollar, after opening at 42.52 and touching an intra-day high of 41.88. The Indian currency has gained 5.3 per cent in this fiscal. Foreign exchange dealers said the RBI did not intervene to prop up the dollar.

The dealers attributed the rise to higher inflow of dollars brought by foreign institutional investors (FIIs) and Indian companies who have raised funds abroad.

Sources said there was also panic selling of dollars by exporters. There are also unconfirmed reports of Reliance Industries and Larsen & Toubro selling dollars.

The RBI is staying away from the market because it is worried over the impact on inflation if it buys dollars. Finance minister P. Chidambaram said yesterday that the rupee was still competitive vis-à-vis exports, and the RBI may think likewise.

Foreign banks, too, were selling dollars to overcome the tight liquidity conditions in the economy. The State Bank of India is reportedly unwilling to lend to foreign banks. This has forced banks to sell dollars.