South Korean stocks edged up in range-bound trade on Tuesday as investors remained cautious ahead of the upcoming Fed decision on interest rates. The local currency lost ground against the U.S. dollar.

The benchmark Korea Composite Stock Price Index (KOSPI) rose 0.32 percent, or 6.1 points, to 1,937.56. Trading volume was slim at 384.3 million shares worth 3.92 trillion won ($3.3 billion), with gainers outnumbering decliners 473 to 324.

The index started lower but traded in a tight range before extending its gains later in the day as institutions picked up shares.

"Institutions remained net buyers, helping the index move up before the market closed, but it was not enough to say that they turned into a pre-emptive mode. It is tough to do that at a time when most market players are holding back ahead of the FOMC rate decision," said Kim Hyung-ryol, a strategist at Kyobo Securities.

Investors bought around a net 210 billion won worth of shares, but foreigners and retailers unloaded around 120 billion won and 140 billion won more worth of shares, respectively, than they bought.

Market uncertainty is mounting before the Federal Reserve is to hold a rate-setting meeting on Wednesday and Thursday (local time).

Investors are keenly watching the result of the meeting from which a rate hike could be announced.

Large caps ended mixed, with auto and medical issues among gainers. Hyundai Motor and Kia Motors closed up 1.29 percent and 1.97 percent at 156,500 won and 51,800 won, respectively. Hanmi Pharm advanced 3.1 percent to 333,000 won.

Samsung C&T, a fashion and construction arm of Samsung Group, rose 2.84 percent to 163,000 won on its first trading day after it merged with Cheil Industries, another Samsung affiliate.

Steel and chipmakers offset the gains. No. 1 steelmaker POSCO ended down 2.65 percent to 184,000 won and chipmaking giant SK hynix shed 2.89 percent to close at 33,600 won. Market bellwether Samsung ended almost flat at 1,123,000 won.

The local currency closed at 1,186.7 won against the U.S. dollar, down 3.6 won from Monday's close.

Bond prices, which move inversely to yields, ended higher. The yield on three-year Treasurys fell 1.4 basis points to 1.653 percent, and the return on the benchmark five-year government bonds dropped 2.3 basis points to 1.880 percent. (Yonhap)