India, Brazil, China currencies seen strengthening - POLL

Brazil's currency, the real, is expected to fluctuate in a narrow range and trade at 1.76 per dollar, near current levels, a year from now, according to the median of around 50 forecasts taken for that currency.

The Indian rupee will end the 12-month period at 45.3 per dollar, compared with a little over 46 to the dollar currently, according to the median of around 40 forecasts.

The poll of more than 100 foreign exchange strategists across the BRIC leading emerging markets -- Brazil, Russia, India and China -- as well as the United States and Europe also foresaw a modestly stronger Chinese yuan but a weaker Russian rouble .

Emerging economies, particularly those in Asia and Latin America, have led the way in the recovery from the worst financial and economic crisis among rich nations in 80 years.

"With the exception of Russia, BRICs are showing great resilience through the crisis. Most people buy into the 'BIC recovery'," said Tim Ash at RBS in London.

The BRIC nations have been claiming more clout globally since the crisis, which has weakened the dominant influence of developed economies.

Brazil, Latin America's largest economy, expanded by 1.9 percent in the second quarter compared with the first three months of the year. It has also staged two of the three largest initial public offerings in the world in 2009.

The economic gains have brought inflows of nearly $10 billion through early October and the benchmark Bovespa index has surged almost 70 percent. It is seen ending the year with an estimated 73 percent gain, its strongest annual rally in six years, a recent Reuters poll showed.

Those inflows, in turn, have helped strengthen the real about a third against the dollar over the same period, and the currency received an additional boost last week when the country was selected to host the 2016 Olympic Games.

"Risk aversion has fallen, but it's still higher than normal," said Roberto Padovani, chief economist at West LB Brazil in Sao Paulo, who predicts that the currency's appreciation will be "positive but not exuberant."

Many Brazilian companies are tied to trade in raw materials and the Chinese have been active buyers of commodities there.

But a stronger real could act as a drag on how easily Brazil can sell goods and raw materials to the rest of the world. "We're going to have trouble with exports," said Joao Medeiros, director of currency trading at Pioneer Corretora de Cambio.

RUPEE RISING

The partially convertible rupee has strengthened to its highest level in more than a year, recovering 13 percent from a record low of 52.2 per dollar touched in early March. It has risen more than 5 percent so far in 2009.

Foreign portfolio inflows have been the key driver of the rupee's rise this year, but analysts say expectations of a rate increase by the Reserve Bank of India (RBI) could drive up inflows into higher-yielding local assets.

"Fund managers want to shore up their returns, and they are likely to chase high-yielding assets. That includes emerging market equities and Indian equities," said Abheek Barua, chief economist at HDFC Bank in New Delhi.

"The pipeline for external commercial borrowings and trade credit seems to have revived, and that is putting appreciation pressure on the rupee as well," he added.

India's benchmark share index has risen more than 70 percent this year, boosted by foreign portfolio inflows of $12.7 billion, nearly reversing net outflows of more than $13 billion in 2008.

The BSE stock index is likely to rise even further by the end of 2009, taking its gains to over 80 percent for the year, on increasing signs of a global economic revival, a Reuters poll showed last month.

Rupa Rege Nitsure, chief economist at Bank of Baroda in Mumbai, said rupee strength "will be recovery driven, but a disproportionate response of global liquidity to recovery. The pace at which we are attracting inflows, certainly it is not justified by fundamentals," she said.

"Because in other parts of the world there are not many opportunities, India will keep attracting more and more inflows."

ROUBLE, YUAN

Russia's rouble has been strengthening rapidly in recent weeks, both against the dollar and the euro-dollar basket that the central bank uses to guide its foreign exchange policy.

It set a new high for the year on Thursday at 29.59 per dollar as the central bank let it strengthen against the basket to 35.95 , giving in to firming pressure from foreign investors buying rouble assets.

But analysts polled said the currency was vulnerable to swings in the price of Russia's oil exports. The rouble "is still fragile, and any sharp oil price drop will weigh heavily," noted Guillaume Tresca of Calyon.

The rouble was forecast at 30.5 per dollar in one month, 31.0 in three months and 30.9 in a year's time.

China's yuan could stay stable "until exports start rising strongly again in year over year terms and deflation fears end," according to Neil Shearing of consultancy Capital Economics in London.

China's central bank has kept the yuan almost flat against the dollar since July 2008, when the global financial crisis began worsening.

It was forecast at 6.83 per dollar in one month, 6.82 in three months and 6.75 in a year's time.

China has repeatedly declared it is in the process of reforming its exchange rate system to allow the yuan to move more flexibly, but that it will not allow moves that could destabilise its economy.