After a selloff in the first three weeks of January, investors have been buying Indian stocks on expectations that accelerating growth will boost corporate profits.
India's benchmark stock index, which had lost ground since reaching a record high on January 4, rose to a four-week high on Wednesday. Foreign funds bought $203.6 million of Indian shares on Monday, the most on a single day this year.
"The upgrade is positive and basically people will use it as an excuse to come back to India," said Bhanu Baweja, currency strategist at UBS in Singapore.
Foreign investments in stocks also helped the Taiwan dollar gain a third of a percent to a one-month high of 31.66 per dollar.
Taiwan's benchmark stock index hit a one-month high on Wednesday, driven by foreign equity investors who bought T$12.2 billion of stocks on Tuesday, the most on a single day this year.
"The foreign inflows trend bodes well for the Taiwan dollar," said Emmanuel Ng, currency strategist at ABN AMRO Bank.
The Singapore dollar gained a fifth of a percent after an industrial outlook indicator on Tuesday allayed concerns about a sharp downturn in exports.
DBS Bank, Singapore's biggest lender, said the Purchasing Managers' Index, suggested a possible early turnaround in the current manufacturing slowdown, particularly in electronics industries, and a pick up in new orders from the United States.
Analysts expect the Monetary Authority of Singapore, which guides the trade-weighted Singapore currency as part of its monetary policy, to continue with its strengthening bias for the Singapore dollar if the outlook for exports improves.
"On balance, we think the evidence of a definite turnaround is still quite tentative," DBS Bank said in a note. "But the data nonetheless supports our view of a shallower and shorter electronics downturn cycle."
Other Asian currencies were steady ahead of the outcome of a US Federal Reserve policy meeting. The market expects a rate rise of 25 basis points.
"Given that we have the Fed meeting tonight, the G7 and the US non-farm payrolls data in the coming days, the market is trying to be a bit square," said Singapore-based Ng.
"The only surprise tonight would be if the statement from the Fed turns out to be more bullish about interest rates."
After a rally last year, Asian currency gains have been checked this year after the Fed indicated it might accelerate the pace of rate increases to ward off inflation pressures.
Many currency strategists expect Asian currencies, such as the Thai baht, Indian rupee and the Philippine peso, to appreciate this year as the dollar weakens because of record US current account and budget deficits.
JPMorgan revised its target for the peso, Asia's strongest currency against the dollar this year, to 53 per dollar by the end of the first quarter from an earlier forecast of 57.7.
It cited the central bank's acceptance of a stronger currency, more clarity on near-term fiscal policy, and domestic optimism.
The peso traded at 54.97 per dollar, close to Tuesday's 15-month high of 54.87.