Indian rupee faces resistance on dollar buying by state-run banks

The Indian rupee faced resistance on Tuesday following a rise driven by the U.S. dollar's struggles a day ahead of the Federal Reserve's highly anticipated interest rate decision.

The rupee was at 83.84 to the U.S. dollar at 10:28 a.m. IST, compared with 83.8875 in the previous session.

The dollar/rupee pair was running into bids from two large public sector banks, a currency trader said, adding that it was "difficult to know" if they were buying for the Reserve Bank of India or for their clients.

Asian currencies were mostly higher and the dollar index was flat at 100.70 having declined in the previous three sessions.

The U.S. dollar "continues to be under pressure" on Fed rate cut hopes solidifying before the central bank's meeting, Srinivas Puni, managing director at forex advisory firm QuantArt Market Solutions, said.

Given the high expectations that the Fed will cut rates by 50 basis points, there is a risk of market disappointment if they cut just 25 bps or issue a more "moderate" statement, Puni said.

Odds of 50 basis points have climbed to nearly 70% from just 30% a week ago. Media reports suggesting that Fed officials are considering a 50 basis point cut have led investors to increase their bets on a more aggressive move by the Fed during its two-day meeting, set to begin later today.

Analysts at ANZ Bank said that worries over a slowdown in the labour market were outweighing concerns over a inflation.