Mumbai: Rupee is likely to appreciate in the near-term on the back of expected higher inflows into the country, according to treasury officials.
The movement of the domestic currency will depend on the mid-term monetary policy review scheduled in March by the Reserve Bank, they, however, added.
"Rupee should appreciate because the market is looking good with sound performance both in domestic and global equities, which will support inflows into the country," Head of Treasury, IDBI Bank, N S Venkatesh said.
He said the currency would take cue from the upcoming monetary policy review scheduled on March 19.
"If there is a rate cut, then it will support growth, which is a positive for the domestic currency," Venkatesh said, adding that high current account deficit (CAD) continued to remain a point of concern for the currency.
CAD, which had touched a record high of 5.4 percent in the second quarter of current financial year, poses risk to the macro-economy and puts the Rupee at a vulnerable position due to its dependency on inflows from foreign institutional investors (FII).
Referring to short-term and medium-term outlook, Venkatesh said that the domestic currency was likely to touch 53 level per dollar in the short-term and 55 level in the medium-term.
Rupee had jumped 28 paise to settle at 54.28 per dollar on last Friday, making it the third straight day of appreciation for the Indian currency.
Another treasury official from a public sector bank said that rupee movement in the near-term would take direction from the policy announcement by the RBI.
"Rupee movement will depend on the policy announcement of RBI in its mid-term policy review. Any cut in the policy rates will strengthen rupee," the official said.
Referring to expenditure cut plan by the US government, the official said that any huge spending cuts would discourage exports, which would have impact on rupee.
He, however, maintained the inflows were likely to continue in the near-future.