The Sun on Sunday published a video showing Vardy abusing a fellow gambler in a casino and calling him ''Jap'' on three occasions
The incident is reported to have taken place in the early hours of July 26 and t he 28-year-old has since apologised for a ''regrettable error in judgement"
Leicester are owned by the Thai Srivaddhanaprabha family and it is only a matter of weeks since they terminated the contracts of Tom Hopper, Adam Smith and James Pearson, son of former manager Nigel, for their conduct on a close season tour of the country - but Ranieri is confident the same fate will not befall Vardy
''The situation is everything is okay, Jamie apologised to everyone, it was a mistake,'' said Ranieri at his press conference on Thursday.
''The relationship is okay
We go on and forward.
"The club has said it is okay
James has apologised and for me it is okay.
"Jamie does something on the pitch and then I speak with him.''
Asked if Vardy would be sacked, the Italian said: ''No
It is not my matter, but he won't be.''
Leicester's investigation into the matter is ongoing but it is understood the Barclays Premier League club could provide an update via a statement before Saturday's game against West Ham at Upton Park.
Vardy, who opened the scoring for Leicester last weekend as they began the season with a 4-2 home victory over Sunderland, was a late bloomer at the highest level.
He was still playing non-league football with Fleetwood as recently as 2012 but made his name following a £1million move to Leicester.
That made him the most expensive non-league player in history but he soon began repaying the faith of then-manager Pearson.
He scored 16 goals as the Foxes won promotion to the top flight, netting five times during the last campaign as the team fashioned an unlikely escape from relegation.
Vardy was rewarded with a maiden England call-up by Roy Hodgson, making his debut as a second-half substitute in the goalless friendly draw against the Republic of Ireland in June.
Source : PA
Source: PA