* Local share gains, supportive U.S. data aid * Volumes remain low on cbank curbs, year-end caution * Dollar demand for oil import payments watched (Updates to close) By Archana Narayanan MUMBAI, Dec 26 (Reuters) - Indian rupee ended stronger in thin trade on Monday as some bets on a further decline in the currency were covered amid improved risk sentiments on positive U.S. jobs and manufacturing data. The rupee closed 0.4 percent stronger at 52.7250/7350 to the dollar, from Friday's close of 52.9600/9675. "Most of the traders are absent from the market and in thin liquidity conditions, small flows result in exaggerated moves," said Hari Chandramgathan, a forex dealer with Federal Bank in Mumbai. Holidays in the United States, Europe and some Asian markets kept volumes light. Besides, banks are expected to avoid taking big bets before closing their accounts for the quarter, traders said. " (Expect) no major change in the direction in currency trend till second week of January. The euro zone crisis, domestic economic slowdown are factored in, but still there could be some risk aversion, when the actual event happen," he said. Chandramgathan expects the rupee to trade in 52.40/53.25 range in the near term. A Reuters poll on Friday showed many analysts think most potential negative factors have been factored in. Bargain buying sent Indian shares up 1.47 percent in thin trade on Monday, led by gains in software exporters, Reliance Industries and lenders, as U.S. jobs and manufacturing data signalled underlying strength in the U.S. economy. Traders said a likely dollar swap arrangement by the Japanese government with India could underpin the rupee in the long run. India and Japan are negotiating a new currency swap agreement ahead of a visit to New Delhi by Japanese Prime Minister Yoshihiko Noda this week, a foreign ministry official said on Monday. Measures taken by the Reserve Bank of India over the last few days to curb currency speculation, after the rupee hit a record low of 54.30 to the dollar on Dec. 15, also kept the trading appetite subdued, dealers said. For details of steps taken by the RBI to curb the rupee's volatility and increase inflows, see: "A renewed bout of global risk aversion emanating from the ongoing euro area crisis can lead to further depreciation in the INR and instability in the macro economy," said Arvind Chari, debt fund manager at Quantum AMC. The euro held its ground in very thin trade on Monday, staying above an 11-month low against the dollar as investors awaited an Italian debt auction later in the week. Some traders cautioned that if domestic oil companies were forced to step up dollar buying in a thin market to honour their month-end payments, the rupee could slip towards the 53-mark. One-month offshore non-deliverable forward contracts were quoted at 52.71, 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 and the MCX-SX were at 52.79 and the United Stock Exchange was at 52.78, on total volume at $2.3 trillion.

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