Some international investors feel that the Indian rupee may appreciate against dollar in the coming months helped by the fall in domestic inflation and possible improvement in the current account deficit.
Investment analysts expect current account deficit to improve on the back of benign commodity prices in the international market. The wholesale price index-based inflation eased below 6 percent in March.
Investors are said to be positive on the fall in prices of crude oil and gold.
The decline in inflation and a possible fall in current account deficit may bring about macroeconomic stability in the economy and thereby attract foreign capital flows, which may in turn strengthen rupee, analysts argue.
The combination of lower inflation, RBI rate cuts, a narrower CAD and stronger global growth could lead to large foreign equity inflows.
In a scenario in which low commodity prices are sustained and global growth rebounds in second half of 2013, there is likelihood that rupee may perform well, some analysts said.
Investors like Pacific Investment Management Company (Pimco) are said to be bullish on rupee
But some analysts are not as optimistic as others since they feel that any adverse change in the international investment sentiment or volatility in commodity prices could scuttle reverse capital flows away from India.
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