The rupee is expected to remain range bound and average at 64.3 against the US dollar in the current financial year and is likely to be lower at 65.4 in 2018-19, says a UBS report.
According to the global financial services major, it has been among the better-performing currencies in the emerging markets and has appreciated 6 per cent so far this year, but there are few triggers left for a sharp rally of the rupee from its current level.
UBS' forex strategist Rohit Arora sees the rupee (as against the US dollar) at 64 with upside risks over the next three months.
"For the full year, the rupee could average 64.3 in 2017 -18 and 65.4 in 2018-19," UBS said in a research note.
The factors that supported the rupee this year include robust FII debt flow, a strong state election result (Uttar Pradesh), continued reform momentum, improving growth prospects and external stability.
Moreover, broad weakening of the USD so far this year has also helped the rupee this year.
"That said, there are few triggers for a sharp rally of the rupee from its current level," UBS said, adding that debt inflow is likely to become much slower while equity flow is likely to be constrained.
According to UBS, G-Sec limits are almost fully utilised and might be raised by USD 1-1.5 billion in late September, while equity flow is likely to be constrained by elevated growth expectations.
The rupee is currently hovering at 64 against the dollar.