JP Morgan in its latest research report on Indian Markets Outlook and Strategy, released last week, has raised the rupee-dollar target to 44.6 as against 45.3.
The dealers also expect the rising trend in rupee appreciation to continue, given a slew of positive factors.
There have been strong FII inflows throughout the month and the trend is expected to continue. The cooling of oil prices, coupled with a weak dollar vis-a-vis the global currencies, are encouraging for the rupee to appreciate further, said the dealers .
FIIs are favouring India more than other markets as India is performing much better than other emerging markets. Even in the month of December, when FII inflows historically reduce, this year will witness maximum inflows of foreign investment, which is expected to continue in December as well, said Sharukh Wadia, senior vice president IndusInd Bank.
FII inflows are expected to cross the $6.6 billion mark, which is a record all time-high. In view of this, the rupee will appreciate further, he said.
The rupee has now appreciated 3.1% from the years low of 46.4500/4550 recorded on July 29 of the current fiscal, helped by renewed foreign fund investments into Indian capital market, after a plunge that followed a change of government in May.
Moreover, with the Chinese governments decision to raise interest rates for the first time in nine years, the markets are confident of the revaluation of the Chinese yuan.
As most of the Asian countries are dependent on China for foreign trade, revaluation of the Chinese currency will allow other Asian countries also to revalue their respective countries, which in turn, would boost the rupee sentiment. said Tarini Vaidya, treasury head of Centurion Bank.
There is no strong rational for RBI to keep the rupee weak. The exports have been robust for the past few years, despite rupee appreciation. It is just intervening to curb the import inflation, Ms Vaidya said.