Rupee rangebound on caution ahead of Fed meeting, future commentary key

By Anushka Trivedi

MUMBAI (Reuters) - The Indian rupee ended little changed on Tuesday, as investors were wary ahead of a pivotal U.S. Federal Reserve bank meeting decision, amid major economies grappling with a banking sector crisis.

The rupee ended at 82.6550 per dollar, compared to its previous close of 82.6350. It moved in a narrow 15 paisa range all day.

Initial dollar bids from large state-run corporates and lacklustre trading volumes ahead of the Fed meeting led to the rupee staying contained in a range, said two traders.

Heading into the risk event, traders said they built "slightly" long USD/INR positions as foreign exchange markets are shut in India on Wednesday.

Asian currencies were flat to marginally higher, tracking a sombre dollar index.

Focus shifts to the Fed decision, due Wednesday, with investors going back to expecting a 25 basis point (bps) interest rate hike amid relative calm after a crisis emanating from Credit Suisse and U.S. mid-sized lenders had roiled financial markets over the past week.

Fed funds repricing has been quite volatile off late, and at one point on Monday it indicated higher chances of a pause than a hike, fuelled by global central banks pledging liquidity support in the wake of the banking crisis.

"A 25 bps move...can either be read as a sign of confidence in the financial sector and a reiteration of the inflation focus or as a policy misjudgement that could accelerate banking troubles," ING analysts said in a note.

"On the flip side, a hold may either reassure investors or be interpreted as a de-facto sign of alarm."

Clear direction is possible only from the Fed's commentary and the dot plot, said a foreign bank trader.

(Reporting by Anushka Trivedi; Editing by Sonia Cheema)