* Rupee ends at 54.2050/2150 per dlr vs 54.43/44 on Tues
* Custodian banks seen selling dlrs; shares rise 0.5 pct
* INR may rise more and stabilise around 53/dlr by Dec-IDBI
By Swati Bhat
MUMBAI, Nov 7 (Reuters) - The Indian rupee strengthened for a second straight session on Wednesday, recovering further from a one-and-half month low hit in the previous session, as U.S. President Barack Obama's re-election to a second term boosted risk assets globally.
Traders expect the United States to continue with its quantitative easing programme, which would ensure adequate dollar liquidity and boost risk assets and aid the rupee.
"The U.S. election uncertainty is out of the way and to that extent there is a risk-on mood. Foreign funds would continue to chase high interest rate assets in countries like India and to a small extent it will support the India growth story," said N.S. Venkatesh, treasurer at IDBI Bank.
"I think rupee should stabilise around current levels, trade range-bound between 53 to 54.50 levels for now and end the year around 53-53.50. The only risk to this view is the reform process getting delayed," he added.
India will likely miss its revised fiscal deficit target for the financial year ending in March, a Reuters poll showed, putting a question mark over the country's efforts to avert a credit rating downgrade.
The main indices rose for a sixth session on Wednesday, marking their highest close in near 4-1/2 weeks, as State Bank of India rose on hopes of better asset quality in September quarter results, while other lenders such as ICICI Bank rose in anticipation of better loan growth in the holiday season.
The partially convertible rupee closed at 54.2050/2150 per dollar, 0.4 percent stronger than its previous close of 54.43/44. The pair moved in a range of 53.9650 to 54.3750 during the session.
On Tuesday, the rupee had dropped to as low as 54.7850, its weakest since Sept. 14.
Traders said some dollar selling was also seen from corporates but importers stepped into the absorb the flow around 54 levels, preventing further gains.
"Price action seems to suggest some short-covering took place today. Now that the positions are cleaner, and with the U.S. elections behind us, looks like people willing to test downside again," the head of forex trading at a foreign bank said.
"There were some custodian banks who sold today. I would think unless we see the global sentiment sour, we could test levels lower than 53.50-53.20," he added.
In the offshore non-deliverable forwards segment, the one-month contract was at 54.52 while the three-month was at 55.12.
In the currency futures market, the most-traded near-month dollar/rupee contract on the National Stock Exchange and the MCX-SX closed at around 54.38 with a total traded volume of $6.4 billion. (Editing by Sunil Nair)
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