MUMBAI, Aug 14 (Reuters) - The Indian rupee drifted on Friday, on course for a weekly decline kept modest by the central bank's frequent dollar-selling interventions amid the Middle East conflict.
The rupee was little changed at 95.3975 per dollar, hovering in a narrow range with traders keeping an eye on oil prices while pointing to state-run banks' dollar sales, likely on behalf of the Reserve Bank of India.
Over the week so far, the currency has hovered in an under-30-paisa range - the narrowest weekly band since February.
Anxiety over the conflict has kept importer dollar demand elevated, with oil refiners especially keen to capture dips on the dollar-rupee pair, a trader at a private bank said.
Oil prices nudged higher after the United States threatened an indefinite naval blockade of Iran, reviving concerns about the supply of crude. India is particularly vulnerable to such supply disruptions as it imports about 90% of its oil.
"The 95.00–95.10 zone remains a key support for USD/INR. Having broken above 95.30 earlier this week, the path towards 95.80 and eventually 96.20 stays open," said Amit Pabari, managing director at FX advisory firm CR Forex.
Regional currencies and stocks were trading mixed while the dollar index was hovering little changed just shy of the 100 mark.
Data released on Thursday pointed to unchanged U.S. producer prices in July. It further supported dialling back bets on a Federal Reserve September hike, now seen as a roughly 35% chance, per LSEG data.
"With CPI still above the Fed's 2% target, markets will assess if the Fed is committed to tackle inflation, especially if price pressures prove sticky in the coming months," MUFG said in a note.
Rate expectations are also expected to be key drivers for dollar-rupee forward premiums. On the day, the 1-year forward implied yield dipped to 2.71%, down 2 basis points on the day and the lowest since early July.
Reporting by Jaspreet Kalra; Editing by Harikrishnan Nair
Source: Reuters