The rupee is likely to hover around the current level of 54.30 to the dollar in the near future in absence of any visible triggers, coupled with the lingering political uncertainties after the DMK pullout and the wavering of support SP, according to traders.
Political uncertainty after the DMK pulled out of the government last week and the talks of the Third Front revival by the Samajwadi Party (SP), would also weigh on the currency in the near future, they said.
"Currently, the rupee is hovering around 54.30 levels as there is no visible trigger for the market about future directions along with less activity due to the fiscal-end phenomenon. Also, political uncertainty is weighing on the rupee despite the capital inflows. In this scenario, the rupee is likely to be trading at the current levels," said Hemal Doshi, chief currency strategist at Geojit Comtrade.
Mr Doshi added the current environment is pretty confusing from the trading point of view as there is no visible direction for the rupee.
On the international front, strengthening of the dollar against the euro following the Cyprus crisis will drive
the rupee direction, he added. Treasury officials of the public sector banks also echoed similar sentiments, but, added some of the steps taken up by the government will increase the capital inflows.
"Some of the steps like increasing the investment limit for foreign institutional investors are positive as far as capital inflows are concerned. Also, concerns with regard to Cyprus are slowly being resolved. But, there is a bit of stress due to political uncertainties. In this backdrop, the rupee is likely to trade in the range of 53.50-54.50 in the next one month or so," said N S Venkatesh, treasury head of IDBI Bank.
Another treasury official, who did not want to be quoted said, given the current environment, the rupee is eyeing a trigger for future direction, absence of which will keep the domestic currency range bound.