The Indian rupee closed modestly stronger on Friday, aided by an easing in oil prices and the dollar after a searing rally in both kept up the pressure on the local currency through the week, eliciting central bank interventions to avert sharp falls.

The rupee closed at 95.8125 per dollar, up slightly from its close at 95.9550 in the previous session. The currency was little changed on the week.

Oil prices fell about 2% on Friday, though remained north of $100 per barrel as investors weighed attacks against Saudi Arabia by Houthi fighters against the possibility a truce between the US and Iran amid ongoing diplomatic efforts.

Elevated energy prices have also lifted global bond yields as investors wager that central banks will need to raise borrowing costs to combat inflation.

"Markets remain reluctant to price in any optimism into oil prices, which keeps risks on the upside for rates," analysts at ING said in a note.

Higher rates exert pressure on risk assets like emerging market currencies and equities. India's benchmark stock index posted its longest weekly losing streak in six years on Friday.

Persistent intervention by the Reserve Bank of India have, however, contained pressure on the rupee, traders said. The central bank has also used sell-buy swaps to mop up excess rupee liquidity from the banking system.

The swaps, alongside relatively lower liquidity in the forward market and the cutting of stale received positions, pushed dollar-rupee forward premiums up sharply this week, a swap trader at a bank said.

The 1-year forward yield rose as much as 28 basis points in three sessions to touch 3.50% on Friday, its highest level since May.

"Typically, such sharp moves cool off after market positioning gets lighter," another swap trader at a bank said.

"That should happen (this time too), but global risk factors could keep positioning light for the time being," the trader added.