Rupee Will Shine as Global Recovery Improves, Wells Fargo Says

India’s rupee will strengthen in the next 18 months as the global economy stabilizes and the Asian nation’s growth continues, according to Wells Fargo & Co.

“Once global investor sentiment becomes more stable, India’s robust growth profile and rising interest rates should attract foreign capital flows, putting upward pressure on the currency,” Vassili Serebriakov, a currency strategist at Wells Fargo in New York, wrote in a research note yesterday.

The rupee will strengthen to 43 per dollar in 18 months, Serebriakov wrote. The currency, which was at 47.36 yesterday, has weakened 1.8 percent against the dollar this year.

The currency has declined this year because of “broader financial market instability” stemming from the European sovereign-debt crisis, Serebriakov wrote. The fall contrasts with the pace of India’s recovery, he wrote. The nation’s economy grew 8.6 percent in the first quarter from a year earlier, and the Reserve Bank of India has increased interest rates three times this year, he wrote.

“The Indian fundamentals will sort of shine through once global conditions improve,” Serebriakov said in a telephone interview. “That’s when the rupee will move up.”