The Indian rupee rose on Wednesday as dollar sales from state-run and foreign banks blunted pressure from demand tied to the monthly expiry of exchange traded futures as traders kept an eye on volatile oil prices.
The rupee rose 0.14% to 95.72 per U.S. dollar, hovering around its strongest level in two weeks.
Traders pointed to a short burst of dollar sales by a mid-sized state-run lender, which pulled the rupee modestly higher even as heightened demand to buy dollars at the daily reference rate exerted pressure.
The reference rate is the daily benchmark used to settle contracts and often attracts concentrated dollar buying or selling.
On Wednesday, the demand was at least partially linked to the maturity of about $2.7 billion worth of exchange traded futures, per data from the National Stock Exchange of India.
India's central bank has been "intervening in the futures market over the last few sessions, which has reflected in the buildup in open interest," a trader at a private bank said. The open interest rose by about $700 million over the last week.
Meanwhile, Brent crude oil futures climbed nearly 4% after dropping sharply over the last three sessions as markets cheered hopes of talks between U.S. and Iran to end their war which began in late February and continues to rattle global markets.
Those hopes were dampened after joint strikes in Iraq by the United States and Saudi Arabia, and the interception of Iran's ballistic missiles aimed at U.S. forces in the Middle East.
Later in the day, the focus will be on the U.S. Federal Reserve's monetary policy decision. Markets are currently pricing in about a 30% chance of a rate hike.
"Our base case is for a hawkish hold, with the Fed likely to keep rates unchanged and emphasize that inflation risks remain high. This could keep US yields and the dollar supported, in turn weighing on Asia FX broadly," MUFG said in a note.
