ForexSpace.com - Forex traders’ eyes widened today as the Indian rupee posted its first gain against the greenback in four sessions, closing out at 55.65/66 per dollar. Recovering from an all-time earlier in the session, after the central bank governor failed to rule out selling dollars directly to oil importers, the Indian currency rebounded off 56.40, taking out a major chunk of dollar demand from the spot market.

The rupee also gained some top cover as forex traders and brokers saw sporadic intervention from the India’s Reserve Bank, while other players cited USD selling by custodian banks as well as exporters taking advantage of converting their foreign currency holdings on the final day of the two-week deadline mandated recently by the central bank. Making dollars available for oil companies would remove a sizeable source of demand for the U.S. currency from the market, and help support the rupee.

Commenting on the RBI news, Paresh Nayar, head of fixed income and fx at First Rand Bank, saw the unfolding scenario as positive for the market, “but I believe there were also genuine flows in the market after a long time,” he added. “Foreign banks were major sellers today," concluded Nayer.

All-in-all, the Indian currency has shed 12.7 percent versus the USD since its 2012 peak of early February, thereby occupying the top slot as Asia’s worst performer so far this year. After intervening aggressively earlier this month, traders say the RBI has appeared to hold back in recent days, reluctant to fight the intense global risk aversion that is pushing up the dollar.

In the currency futures market INRFUTURES, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all ended around 55.72 on a total volume of $6.7 billion.

Drew Hillier. Editor