MUMBAI, Feb 14: Indian interest rate swaps (IRS) ended higher on Friday, with the market worried that inflation could spurt and the rupee weaken amid rising global oil prices, which hit 28-month highs due to U.S.-Iraq tensions.

Traders fear that interest rates will firm if inflation rises and industry competes more aggressively with the government for savings in a recovering economy.

The underlying fear is what happens in Iraq and its impact on oil prices, said a trader at a private-sector bank.

Firm oil prices would bloat India’s import bill as crude is its largest overseas purchase, weakening the rupee and pushing up forward dollar premiums, from which implied rupee rates are derived.

Traders are waiting to see how members of the UN Security council react to an Iraqi arms report that is due to be made public later in the day.

The two-year swap linked to the six-month implied rupee rate benchmark, the Reuters MIFOR, closed at 5.93/03 per cent against the previous 5.78/85 per cent.

The five-year swap indexed to the same benchmark closed at 6.45/55 per cent against the previous 6.22/29 per cent.

Implied rupee rates are indicative term rupee rates derived from dollar premiums and US inter-bank money rates.

The annualised premium on the six-month dollar closed at 3.61 per cent, up from the previous 3.40 per cent.

The one-year swap linked to the the NSE MIBOR closed at 5.81/87 per cent against the previous 5.76/83 per cent.—Reuters