MUMBAI: The Indian rupee gave up most gains as investors covered their short dollar positions ahead of the outcome of the US Federal Reserve’s two-day policy meeting, while weaker local shares also hurt.

The Fed is expected to cut monthly debt purchases by another $10 billion, after cutting it by the same amount in December. Continued reduction in US stimulus could curb the waves of cheap money that had benefited emerging markets such as India in recent years.

RBI Governor Raghuram Rajan reiterated his belief that India is better prepared for foreign exchange outflows than it was last summer when the rupee tumbled to a record low because of similar Fed tapering fears.

“Everyone was short squaring their positions ahead of the FOMC outcome. If there is a further cut in asset purchases by the Fed some weakness in the rupee is expected, but it should not hurt in a very major way,” said Hari Chandramgethen, head of foreign exchange trading at South Indian Bank.

The rupee closed at 62.41/42 per dollar compared with 62.51/52 on Tuesday after moving in a range of 62.1050 to 62.52 during the session.

Traders expect the pair to hold in a broad 62.00 to 62.60 range on Thursday.

The rupee was also hit after India’s NSE share index fell for a fourth consecutive session on Wednesday to its lowest close in two months as banks were hit after India’s biggest private lender, ICICI Bank, said bad loans had risen and that it would set aside more funds.

In the offshore non-deliverable forward PNDF, the one-month contract was at 62.85, while the three-month was at 63.71.