* Local shares jump 3.4 pct; boost inflow hopes
* Rupee seen pressured in near-term as deficits weigh
* Cbank assures more steps to aid rupee if need arises
(Adds quotes, details, updates to close)
By Shamik Paul
MUMBAI, Dec 21 (Reuters) - A sharp rebound in local
shares amid recovering global appetite for risk and some dollar
inflows lifted the Indian rupee on Wednesday, even though its
outlook remains bearish.
Traders said recent measures spelt out by the central bank
to shore up the local unit helped, but the comfort looked
short-lived with slowing growth and widening trade deficit in
Asia's third-largest economy weighing.
The rupee ended at 52.49/50 to the dollar, 0.7
percent stronger from Tuesday's close of 52.87/88, after moving
in a 52.44-52.80 percent range.
"There were custodial flows seen today. Also, equities are
on the positive side, which is helping the rupee," said Vikas
Babu, a forex trader at state-run Andhra Bank.
Indian shares gained 3.4 percent on Wednesday to their
highest close since Aug. 29, ending their 5-day losing streak,
bolstered by bargain buying and firm global markets, although
investor confidence remained frayed over slowing domestic growth
and policy inaction.
Traders said comments by a senior government official
indicating the government was looking at all options to attract
foreign capital inflows also helped the local unit.
"The market is in a selling mode as it expects the RBI to
take more steps to prevent the rupee from weakening," a dealer
with another state-run bank said.
Subir Gokarn, a deputy governor at the Reserve Bank of
India, said on Tuesday the central bank would use other measures
to bring stability to the foreign exchange market.
For details on steps taken by the RBI to curb the rupee's
volatility and increase inflows, see:
"But I see a huge demand-supply mismatch, even in the
near-future, because of the trade deficit," the dealer with the
state-run bank said.
India's trade deficit for the fiscal year ending March 2012
is expected to sharply widen to $155-$160 billion from $104.4
billion a year ago, posing further downside risks to the weak
currency.
The rupee is being pressured by the country's large deficit
and other macroeconomic fundamentals, K.C. Chakrabarty, a deputy
governor of the central bank, said on Tuesday.
"With FII interests proving fickle (despite the favourable
rate differential story) and FDI interests likely to be
disenchanted by the slow-moving reforms agenda, funding the
current account deficit will prove to be an uphill task in the
year ahead," said Radhika Rao, economist at Forecast PTE.
European stocks rallied and the euro was well bid on
Wednesday as investors priced in an improvement in the economic
outlook and looked forward to a big take up by banks of the
European Central Bank's first-ever offer of three-year loans.
One-month offshore non-deliverable forward contracts
were quoted at 53.93, indicating more short-term weakness in the
onshore spot rate.
In the currency futures market, the most-traded
near-month dollar-rupee contracts on the National Stock
Exchange, the MCX-SX and the United Stock Exchange were around
52.7, with total volume at $4.6 billion.
