The Indian rupee is fast emerging as one of the most-traded currencies at the futures market on increased exchange rate volatility coupled with improved profits due to simultaneous purchase and sale of the futures, a newspaper report has said.

According to Washington-based Futures Industry Association, the Indian rupee was the world's third most-traded currency at the futures markets in the first half of 2010, followed by the dollar and the euro.

Analysts said with more exchanges offering futures trading, investors are using arbitrage opportunities -- continuous gains on price differences which helps to boost rupee volumes on all exchanges.

The surge in rupee trading volumes is reflected in volumes on the Dubai Gold and Commodities Exchange (DGCX), which pioneered rupee futures contracts on an exchange in June 2007.

The DGCX's Indian rupee/dollar futures extended its outstanding run over 2010 into the new year, setting a fresh all-time daily volume record of 11,968 contracts on January 5, 2011.

The day's volume was in excess of $525.21 million (Dh1.93 billion).

"India's rapidly growing trade flows, increased cross-border investments and the fluctuation in exchange rates have created a corresponding requirement to hedge risk," said Director and CEO of JRG International Brokerage Sajith Kumar PK.

"The Indian rupee futures contract continues to attract greater interest and participation as more market participants become aware of its unique status. The Indian rupee is the only futures contract available for trading and hedging outside India," CEO of DGCX Eric Hasham said.

The new daily volume record follows the DGCX Indian rupee futures' exceptional success in 2010. Its 2010 annual volume of 480,725 contracts represented 25 per cent of the exchange's overall annual volume of 1.925 million contracts, the report further quoted.