MUMBAI: The Indian rupee held a narrow range against the dollar on Tuesday after a dip in U.S. Treasury yields, while concerns over the impact that the Middle East conflict could have on oil prices persisted.

The rupee was at 83.2500 by 10:42 a.m. IST to the U.S. dollar compared with 83.2625 in the previous session. The unit has been in an about 2 paisa range so far and volumes are low, according to traders.

“It is likely to be like this till at least Thursday when we will have the U.S. inflation data,” a forex salesperson at a mid-sized private sector bank said.

Indian rupee slightly up; RBI’s rate decision not seen having major impact

“Corporates are not doing much, apart from the routine payments and receipts.”

Anindya Banerjee, head of research - FX and interest rates at Kotak Securities, pointed out that breaking above 83.30 for USD/INR is proving to be a challenge with the Reserve Bank of India (RBI) a major seller while a dip on the pair will require support from other markets.

Oil prices eased slightly after Monday’s rally fuelled by the Middle East conflict. Brent crude dipped to $87.70 a barrel, having rallied more than 4% in the previous session, its biggest gain since April.

“The key concern for energy markets is that the conflict widens to involve Iran,” Capital Economics said in a note.

“With the oil market already very tight, we think that such a scenario could send the oil price well above $100/bbl, at least temporarily.”

U.S. Treasuries, resuming trade following the three-day weekend, rose following comments by Federal Reserve officials that indicated that more rate hikes may not be needed.

Fed officials indicated on Monday that rising yields on long-term U.S. Treasury bonds could steer the central bank from further increases in its short-term policy rate.

The odds of a Fed November rate hike dropped and the 2-year U.S. yield fell below 5%.