The Indian rupee navigated competing impulses to end little changed on Wednesday, with traders pointing to volatility in oil prices, elevated dollar demand due to maturing non-deliverable forward contracts and likely central bank intervention.
The rupee closed at 95.2650 per dollar, up marginally compared to its close of 95.35 in the previous session.
The local currency oscillated between 95.11 and 95.56 over the course of the trading session. State-run banks were spotted offering dollars and conducting dollar-rupee buy/sell swaps, most likely on behalf of the Reserve Bank of India, traders said.
Brent oil prices steadied near $90 per barrel on Wednesday after swinging between $98 and $89 per barrel over the previous two sessions.
Iran's Revolutionary Guards said they had carried out missile and drone attacks on U.S. military bases in Jordan, Kuwait and Bahrain on Wednesday in retaliation for American strikes on Iranian targets around the Strait of Hormuz.
"The initial market response to renewed military strikes between Iran and the U.S. has been relatively muted suggesting confidence that the fallout will be contained," MUFG said in a note.
The escalation in violence though deepens doubts about the prospects for a deal to end the war that started on February 28 and has sparked the most severe oil supply disruption in history, clouding the outlook for energy importing economies like India.
Later in the day, the focus will turn to the release of U.S. consumer inflation data for May. The data is expected to show that CPI rose 4.2% year-on-year last month, up from 3.8% in April.
"With the distribution of outcomes unusually wide, today's CPI release carries heightened potential for outsized market moves relative to recent data prints," per MUFG.
