Standard Chartered Bank on Friday upgraded the rupee’s short-term rating to ‘neutral’ from ’underweight’, citing the government’s capital flow enhancing steps announced recently and an improved global economic environment.

The foreign bank also raised its September-end target for the Indian unit, which has lost nearly 25 per cent over the past year to earn the distinction of being one of the worst performing currencies in Asia, to Rs 56 to a dollar from the earlier Rs 57.50.

“It is likely that we have seen the highs of the year for USD-INR and we lift our short-term rating for the Indian rupee (INR) to Neutral from Underweight,” a report by the bank’s economists said.

Steps taken by the authorities to boost capital flows and reduction in risks emanating from Europe will help rupee, it noted.

StanChart, however, maintained that it is too early to being “overweight” on the rupee and added that there will be no substantive recovery from the lows.

The domestic currency breached many psychological levels and touched an all-time closing low of Rs 57.15 to the greenback in a depreciation which started last August.

The slide in the currency is being attributed to a host of factors, the most prominent of it being the country’s inability to attract capital flows due to factors like worsening current account situation, policy paralysis and slowdown in growth.

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