Where Is The Indian Rupee Headed To?

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NEW DELHI – The world eyes the Indian rupee as the next strong currency to rule the trade world. The Indian rupee is fire fighting its way in the volatile trade market with the Euro zone making everyone nervous. There has been a strong competition between the Indian rupee and the U.S. dollar. The U.S. dollar is still showing positive signs with its crippled market but India is no less as it is still making its way up by appreciating the rupee value day-by-day.

The rupee rose for the third straight session on Monday appreciating further by 18 paise to close at the one-week high of 48.97 against the U.S. currency on strong equities and sustained dollar selling by exporters. The rupee is expected to appreciate further in 2011 on the back of overseas investors pumping money in India due to strong gross domestic product (GDP) growth story, high interest rates and good corporate earnings.

Stoked by a hawkish interest rate employed by India’s central bank to stem inflation, the rupee enjoyed a solid performance in 2010, gaining about 5 percent against the dollar, but the party may just be getting started.

Wells Fargo & Co., the best rupee forecaster in 2010, predicts the currency’s appreciation will double this year as the central bank adds to last year’s six interest-rate increases, according to Bloomberg News.

Wells Fargo’s forecast is for 10 percent rupee appreciation this year. India is the second-fastest growing major economy in the world behind China, but its rate of inflation actually surpasses China’s. The rupee will climb 10.2 percent to 41 per dollar, according to Nick Bennenbroek, head of foreign-exchange strategy at the San Francisco-based bank reports Bloomberg.

“The rupee is one of our top three preferred currencies for 2011 in Asia,” Bennenbroek, who is based in New York, said in an interview on Jan. 3. “India remains an economic outperformer in 2011 and as inflation is high, policy tightening will continue.”