* Indian rupee ends at 55.06/07/dlr vs 55.1650/1750 on Fri
* Fiscal slippage to hurt rupee in the medium term - traders
* Rupee seen moving in 54.50-56.00 range in the near-term
By Swati Bhat
MUMBAI, Nov 19 (Reuters) - The Indian rupee rebounded on Monday from over two-month lows in the previous session on the back of dollar sales by custodian banks and a broad risk-on mood globally, but dollar demand from oil firms capped the gains.
Global shares and regional currencies gained on Monday on what investors perceived as encouraging signs of progress in talks to resolve the fiscal crunch in the United States.
However, caution is expected to prevail ahead of the start of the winter session of parliament, which will test the government's resolve to pass legislation at a time when worries about the fiscal deficit are rising.
Last week, India raised less than targeted in its auction of 2G mobile spectrum, exacerbating doubts about whether the government can meet its goal to contain its fiscal deficit at 5.3 percent of gross domestic product.
"After the 2G auction it seems difficult for the government to contain the fiscal deficit at 5.3 percent as estimated by the finance minister, so bias will be towards weakening of the rupee," said Uday Bhatt, a forex dealer with UCO Bank.
"The broad range for the near-term should be 54.50 to 56.00," he added.
The partially convertible rupee closed at 55.06/07 per dollar versus its previous close of 55.1650/1750. On Friday, the unit had dropped to a low of 55.2050, its weakest since Sept. 13.
Traders saw good dollar inflows from custodian banks, helping the rupee gain to as much as 54.9375, although demand from oil refiners capped broader gains in the domestic currency.
Traders said the movement of the local share markets will also be key, given the importance of foreign fund flows to Indian markets. The benchmark BSE index edged higher on Monday, rebounding from two-month lows.
In the offshore non-deliverable forwards market, the most-active one-month contract was at 55.32 while the three-month was at 55.90.
In the currency futures market, the most-traded near-month dollar/rupee contract on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 55.11 with a total traded volume of $4.35 billion. (Editing by Rafael Nam)