The Indian rupee ended mostly flat after the Reserve Bank of India (RBI) kept the key policy rate unchanged as widely expected, while the focus shifted to the U.S. Federal Reserve rate outcome next week.

The rupee ended at 82.57 to the U.S. dollar, compared with 82.5475 in the previous session. The rupee moved in a narrow range of 82.54-82.6125 during the day.

The RBI's move was more or less discounted by the market, said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services.

Also read: Sensex, Nifty slide as RBI signals tight policy ahead

The Indian central bank on Thursday, however, signalled that monetary conditions will remain tight for some time as it looks to further curb inflationary pressures. Post the RBI outcome, India's overnight indexed swap (OIS) markets pushed rate-cut bets to 2024.

The rupee is expected to be stable due to lower current account deficit and continued foreign fund inflows in the current financial year, said Murthy Nagarajan, Head-Fixed Income, Tata Mutual Fund.

Meanwhile, the dollar index hovered near three-month highs after a surprise rate hike from the Bank of Canada suggested other central banks, including the Fed, could maintain a hawkish stance when policymakers meet next week.

Also read: India bond yields rise after RBI holds rates, says inflation above target

U.S. Treasury yields rose after a rise in bets of a Fed rate hike in the June 13-14 meeting.

For the near term, it looks like the dollar can hold the majority of its recent gains into next Wednesday's Fed meeting. The release of the U.S. May inflation data next Tuesday will be a big market driver too, ING analysts said in a note.

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