Rupee falls on euro zone woes

An employee uses an electronic machine to check an Indian currency note inside a bank in Allahabad December 16, 2011.

MUMBAI (Reuters) - The rupee fell on Thursday, snapping two sessions of gains, as euro zone concerns again took centrestage with worries over whether Spain would seek a bailout soon.

The rupee's gains from U.S. President's Barack Obama's re-election were wiped out as global stocks and the euro fell, pulling down the local currency with it.

Local shares ended down 0.3 percent, ending a six-day winning streak.

"We believe a lot of positive news has already been priced in and we reduce our bias on short USD/INR into year-end," said Vivek Rajpal, strategist at Nomura in Mumbai.

The investment bank expects the rupee to trade at 53 to the dollar by end-December and advises investors to short USD/INR through options in the near term.

The partially convertible rupee closed at 54.36/37 p er dollar, 0.3 percent weaker than its previous close of 54.2050/2150.

Investors will closely watch how the government manages its finances and whether it can push through key reforms on insurance and pensions when parliament meets later this month.

The government is hopeful of containing its fiscal deficit to 5.3 percent of GDP in this fiscal year, but a recent Reuters poll pegs it at 5.8 percent.

Sentiment on the rupee turned bearish once again after some signs of optimism in the last two months, as per a Reuters poll of currency strategists.

In the offshore non-deliverable forwards segment, the one-month contract was at 54.62 while the three-month was at 55.19.

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 54.55 with a total traded volume of $4.6 billion.

(Editing by Sunil Nair)