The rupee was little changed as traders kept a keen eye on oil, the dollar

The Indian rupee drifted in a narrow range on Friday, broadly on a softer dollar and well-contained oil prices, although traders remained wary of taking strong directional positions due to lingering risks from the Middle East.

The rupee rose 0.1% to 95.31 per dollar, after closing at 95.3875 in the previous session.

Asian currencies rose on the back of further easing by the US Federal Reserve, which underpinned the dollar. Regional stocks were also strong with India’s benchmark Nifty 50 stock index gaining 1%.

The spotlight remains on oil prices even after the three-week-old ceasefire between the US and Iran broke down.

Brent crude oil prices last traded at $76.5 per barrel, for a 6% week-over-week gain. Iranian armed forces attacked US military infrastructure in the Gulf states on Thursday following a US attack on Iran’s southern coast and eastern provinces.

“The longer it (USD/INR) stays above the 95 level, it will be easier for the market to bias from ‘sell on uptick’ to ‘buy on dips’,” said a state bank trader, as a hold below the psychologically important level could trigger a fresh round of dollar buying.

Intermittent flare-ups in the Middle East, maturing non-deliverable forward contracts and demand for trading dollars have dampened the rupee’s gains even after capital inflow measures were announced last month.

“We remain relatively constructive on the INR, supported by the Reserve Bank of India’s recent measures aimed at narrowing the balance-of-payments gap,” analysts at ING said in a note.

On the broader Asian region, analysts said weak capital-account dynamics “could limit how quickly regional central banks can move away from a tighter policy stance.”

The RBI has kept benchmark policy rates unchanged since December last year while counterparts in Indonesia and the Philippines have hiked them to stabilize their currencies.

India will report consumer price inflation data for June next week and markets are currently pricing in a rate hike of around 50 bps over the next 12 months.