The rupee breached key resistance levels and spurted to a 38-month peak against the US currency on Wednesday, buoyed by robust foreign fund inflows and export proceeds, shrugging off possible Resurgent India Bonds redemption pressures.

In volatile trade at the interbank foreign exchange market, the rupee closed at Rs 45.56/57 per dollar, a whopping 26 paise gain from Monday's finish of Rs 45.8250/8350, following a distinctly firm opening of Rs 45.72/73 per dollar due to bunched up dollar supplies from Tuesday's market closure.

There was no trading at the forex market on Tuesday due to half yearly closure of banks.

The rupee had last breached the 45.60-dollar barrier and closed at Rs 45.55/56 per dollar on August 7, 2000.

Sustained heavy foreign fund inflows, export proceeds and expatriate remittances sent the rupee surging past the 45.70-dollar barrier and then pierced through the crucial 45.60-dollar level to hit new 38-month peaks at 45.56/57.

A lingering weak dollar against major global currencies also largely helped the rupee's sharp gains, dealers said.

Foreign funds continued to be bullish on Indian stocks and pumped in Rs 287 crore (Rs 2.87 billion) on Monday.

"Everybody expected the rupee to gain sharply today, but the pace of the rise came as a surprise to marketmen with the central bank a mute spectator to the spiral steep climb," a forex dealer said, adding, "I think the rupee will undergo a downward correction on Friday after Thursday's Gandhi Jayanti holiday".

Although burgeoning forex reserves, persistent robust trade and capital inflows, coupled with strong economic fundamentals were the main driving force behind the spurt in rupee value, the consistent weakness of the dollar against major global currencies also contributed to the rupee's strength, bankers said.