INDIA RUPEE-Rupee's early gains evaporate on corporate dollar demand, premium slide stalls

By Nimesh Vora

MUMBAI, Jan 23 (Reuters) - The Indian rupee's early gains faded on Friday as dollar purchases by importers for immediate payments surfaced, while a three-day slide in forward premiums paused in the absence of central bank activity.

The rupee INR=IN touched an intraday high of 91.4350 before sliding back toward 91.60, little changed from Thursday's level.

Early support for the rupee came on the back of a weaker dollar, with the dollar index headed for its steepest weekly decline in about a year. Investors were unsettled by President Donald Trump's Greenland remarks and subsequent retreat, pushing the dollar down despite Thursday's robust U.S. data that reinforced expectations of a Federal Reserve pause.

This coincided with interest from foreign banks that wanted to sell the U.S. currency at the Reserve Bank of India's reference rate, per bankers.

However, the rupee came under renewed pressure once fix-related dollar selling dried up and importers bought dollars through private sector banks to meet immediate obligations, bankers said.

"It looks like the opening flow was limited; once it passed, USD/INR was back to being bid," a currency trader at a private sector bank said.

Meanwhile, dollar/rupee forward premiums, which had been declining for the past three sessions, inched higher on Friday.

Traders said the recent slide in premiums was driven largely by the RBI's buy/sell dollar-rupee swaps. With no such activity evident on Friday, premiums found room to inch up.

"The RBI is pretty much the only meaningful receiver in premiums," a swap trader at a state-run bank said. "When they’re not around, the premiums naturally drift higher."