Rupee falters after hitting near one-month high

By Swati Bhat

MUMBAI (Reuters) - The rupee snapped a three-day rise and retreated from a near one-month high hit early on Monday as heavy dollar demand from oil refiners hurt while sentiment was also cautious ahead of the conclusion of general elections next week.

Traders said the market will continue to be driven by flows in the run-up to the results of the national elections due on May 16, as participants bet that the opposition Bharatiya Janta Party (BJP) and its allies will win a narrow majority in the 543-seat lower house of parliament.

Although the rupee has been helped by continued foreign inflows into equities, which helped the currency gain in each of the previous three sessions, overseas investors have turned sellers in index futures totalling 2.43 billion rupees ($40.4 million) over the five previous sessions until Friday.

The one-month implied volatility in the spot rupee stood at 11.3 percent, not far from 12.2 percent hit on April 28, which was its highest since mid-November.

"There was good bidding from state-run banks and oil firms pulling the rupee off highs. 59.90 to 60.60 range will continue to hold with the market swinging mostly to the flows," said Hari Chandramgethen, head of foreign exchange trading at South Indian Bank.

The partially convertible rupee closed at 60.21/22 per dollar compared to 60.16/17 on Friday. The currency rose to as high as 60 to the dollar, its highest since April 9.

Heavy dollar demand from importers pushed down the rupee, offsetting slight gains in Indian shares and gains in other Asian currencies.

Emerging Asian currencies edged up on Monday as last week's U.S. jobs data was not seen strong enough to spur an early rate hike by the Federal Reserve.

In the offshore non-deliverable forwards , the one-month contract was at 60.56 while the three-month was at 61.29.

FACTORS TO WATCH

* Yen hits 2-wk high against dollar on soft China PMI [FRX/]

* Ringgit leads Asia FX gains after U.S. jobs data [EMRG/FRX]

* Ukraine tensions, Chinese data sour sentiment [MKTS/GLOB]

* Foreign institutional investor flows

* For data on currency futures

DIARIES & DATA:

Indian Data Watch [ECONIN] European diary [WEU/EQTY2]

Indian diary [IN/DIARY] US Diary [US/DIARY]

(Editing by Sunil Nair)