The rupee, which posted its best month on record in May, is set to rally 10% to 43 per dollar by mid-2010 as fund inflows from abroad pick up and lower oil prices improve the nations trade balance, said Calyon, the investment banking unit of Frances Credit Agricole SA.

The rupee may outperform many Asian currencies as Prime Minister Manmohan Singh includes some significant pro-market reforms in his second term, helping attract investment, Sebastien Barbe, Calyons Hong Kong-based currency strategist, wrote in a research note on Friday.