MUMBAI, Sept 18(Reuters) - The Indian rupee traded modestly higher on Friday, steadied by portfolio inflows and lower oil prices, but was on track for a weekly decline as investors assessed the outlook for domestic interest rates after a week of global central bank decisions.
The rupee was up 0.1% at 95.78 per dollar, helped by a third straight day of falling oil prices that pushed Brent crude to about $103.50 a barrel.
Dollar sales by foreign banks, likely on behalf of custodial clients, helped the rupee alongside wariness to wager against it around the 96 mark which has drawn central bank intervention, two traders said.
Local and regional stocks gained as well with investors gauging global central bank actions in the face of heightened inflation risks.
The Bank of Japan raised rates to a 31-year high on Friday, two days after the U.S. Federal Reserve delivered its first hike in three years while the Bank of England on Thursday warned rates may head higher if war in the Middle East extends.
The week's monetary policy actions have ended up lifting the dollar index to an over one-month high while the Japanese yen dropped 0.8% on Friday on the back of a dovish twist in the decision.
Persistent interventions by the Reserve Bank of India, meanwhile, have helped anchor the rupee and traders reckon that will continue in the near term.
"If the RBI moves to hike rates as well, the already somewhat elevated cost of betting against the INR would rise further and deter positioning," a trader at Singapore based hedge fund said.
Traders in the swap market have added to wagers on policy tightening by the central bank over the last week with about 80 bps of hikes over the next 12 months.
"We are maintaining our first 25bp rate hike pencilled for December for now, but October is a ‘live’ meeting," analysts at ANZ said in a note.
Reporting by Jaspreet Kalra; Editing by Ronojoy Mazumdar and Nivedita Bhattacharjee
Source: Reuters