Rupee posts mild gains; RBI fears provide floor to currency

By Subhadip Sircar

MUMBAI (Reuters) - The rupee gained marginally on Tuesday on some dollar selling related to arbitrage gains with the offshore non-deliverable forward market, but sentiment remained fragile after a steep foreign sell-off of stocks and debt.

Expectations the Reserve Bank of India will step in when the rupee approaches 60 to the dollar have also prevented the rupee from falling too much after it touched an all-time low of 59.9850 on Thursday last week.

Dealers have also been reluctant to push the rupee lower, noting the RBI has been calling up banks to enquire about their net open positions in currency markets, in what is being seen as a soft hint to cut on speculative trades.

The RBI used the measure to great effect in 2011, when the rupee was also slumping, these traders said.

"There is no reason to believe that the dollar/rupee has topped out. If the pair closes below 59.30 for a couple of sessions consistently, we may see a bounceback in the rupee," said Abhishek Goenka, chief executive at IndiaForex Advisors.

The partially convertible rupee closed at 59.66/67 per dollar, against its previous close of 59.68/69.

Dealers also cited dollar selling related to the non-deliverable forwards market, describing the trades as arbitrage trading with domestic forward markets as helping support spot rupee.

A mild recovery in domestic shares - with the BSE Sensex edging up 0.3 percent - also helped.

In the offshore non-deliverable forwards, the one-month contract was at 60.05, while the three-month was at 60.74.

In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed around 59.77 with a total traded volume of $8.2 billion.

(Editing by Anupama Dwivedi)