INDIA RUPEE-Rupee ends higher as softer dollar, EU trade pact offer breathing room

By Jaspreet Kalra

MUMBAI, Jan 27 (Reuters) - The Indian rupee firmed slightly on Tuesday, helped along by a broadly weaker dollar and the boost from a landmark trade agreement between India and the European Union, which is expected to cut tariffs on nearly all Indian exports.

The rupee INR=IN closed at 91.72 per dollar, up 0.2% from its closing level on Friday. Indian financial markets were shut on Monday for a local holiday. The currency's modest recovery followed a slump to its all-time low of 91.9650 on Friday.

India and the EU have finalised a long-pending landmark trade deal, both sides said on Tuesday. Over a period of seven years, the European bloc will cut tariffs on 99.5% goods traded, with the pact will also reducing or eliminating levies on a slew of EU goods coming to India, including machinery, electrical equipment and chemicals.

The agreement comes on the heels of India finalising trade pacts with Britain, New Zealand and Oman, even as the South Asian nation continues to grapple with steep levies on exports to the U.S.

On the day, broad-based dollar-selling interest helped lift the rupee, traders said.

India's benchmark equity indexes, the BSE Sensex .BSESN and Nifty 50 .NSEI ended up by 0.4% and 0.5%, respectively, on Tuesday.

Despite the day's rise, persistent foreign selling of local stocks - to the tune of more than $3.5 billion this month so far - remains a sore spot for the currency. Foreign investors net pulled out a record nearly $19 billion from stocks last year.

Absent a turnaround in flows, traders and analysts reckon that the rupee's fortunes are unlikely to reverse and that a gradual depreciation is likely to persist.

In the near-term, the rupee is likely to hover in the 91.20-92.10 range with India's federal budget announcement on February 1 the next major cue in focus, said Dilip Parmar, a foreign exchange research analyst at HDFC Securities. ,

Elsewhere, the dollar index =USD was little changed at 97.1 while Asian currencies were split between modest gains and losses.