MUMBAI, Sept 19 (Reuters) - The Indian rupee was little changed to the dollar on Monday as traders eyed the U.S. Federal Reserve's policy decision to break the current deadlock on the local unit.
The rupee closed at 79.77, barely changed from 79.74 in the previous session. Earlier, it hit 79.60, which traders said may have been due to wariness in running long dollar positions amid range-bound markets and high cost of carry.
Giving the rupees a boost was the Reserve Bank of India's signal, in its monthly bulletin released late Friday, that it was in favour of front-loading rate hikes to control inflation and that it intervened aggressively in July to contain the rupee's decline.
The RBI's intervention has helped the currency hold a narrow trading range of 79 to 80 over the last six weeks. But a few analysts reckon that this may be about to change.
"The longer it stays in this range, higher could be the volatility of the subsequent move," said Srinivas Puni, managing director at QuantArt Market Solutions.
"With no structural positives to help the rupee, USDINR could move higher post the Fed."
The Fed is widely expected to deliver another super-sized rate hike at the end of its two-day meeting on Wednesday. The base case is for a 75 basis points rate hike, but futures show a non-negligible 20% possibility of a 100 basis points hike.
Apart from the quantum of the rate hike, traders will watch for changes in the Fed's so-called dot plots and the central bank's inflation forecast.
The dollar index <=USD climbed back above 110, while the 2-year Treasury yield rose above 2.90%.
Indian equities gained, shrugging off declines in other Asian shares and U.S equity futures. (Reporting by Nimesh Vora; Editing by Savio D'Souza)
