UPDATE 1-Cash crunch lifts Indian o/n rates to 18-mo high

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MUMBAI, Oct 1 (Reuters) - Indian overnight cash rates INROND= climbed to 18-month highs on Wednesday morning as a slew of auctions and heavy dollar sales for rupees by state-run banks squeezed cash in the money market.

At 11:15 a.m. (0545 GMT), call money rates were at 17.00/17.50 percent, off a high of 17.50, a level it last tested on April 2, 2007 according to Reuters data, and above 15.75/16.00 percent at the previous close.

Volume was higher-than-average at 130.38 billion rupees ($2.8 billion), as the market was closed on Tuesday for half-yearly closing of accounts at banks.

"The market is short of about 900 billion rupees, so rates have jumped," said Anoop Varma, an associate vice president with Development Credit Bank.

There was an outflow of 100 billion rupees on Monday for settlement of an auction last Friday.

On Wednesday, the government is selling 70 billion rupees of treasury bills, which is expected to further tighten cash conditions.

Heavy intervention in the foreign exchange market to support the rupee, which fell to a fresh five-year low in opening deals, has also put pressure on cash availability with banks, traders said.

The intervention involves selling dollars for rupees by state-run banks, on behalf of the central bank. (Reporting by Swati Bhat; Editing by Ranjit Gangadharan)