India\u2019s rupee, the second worst-performing currency in Asia last month, is likely to weaken further as higher U.S. interest rates boost the dollar, according to Mizuho Bank Ltd. \u201cSome rupee slippage looks unavoidable in the coming months as dollar bulls take charge,\u201d said Singapore-based Vishnu Varathan, head of economics and strategy at Mizuho, the third most-accurate rupee forecaster in Bloomberg\u2019s quarterly rankings. While his year-end rupee forecast is 65.8 per dollar, the currency could potentially drop past 66 during the quarter before finding an initial support at 67, he said. The Bloomberg Dollar Spot Index in September rallied the most this year as the Federal Reserve said a rate increase in December was on the table and President Donald Trump announced a plan to cut taxes. The greenback\u2019s recovery is making investors review the outlook for emerging-market assets. The rupee has gone from being one of Asia\u2019s best-performing exchange rates in the first half to among the worst, with foreigners dumping local stocks amid an economic slowdown and weak corporate earnings. Concern that any potential fiscal stimulus from Prime Minister Narendra Modi\u2019s government before the 2019 elections will worsen India\u2019s public finances saw the rupee sink to a six-month low on Sept. 28. \u201cThe road to 2019 elections is paved with populist potholes that could dim fiscal efforts,\u201d said Varathan. \u201cThe upshot is that as trends in the fiscal and current-account deficits turn less favorable, India\u2019s policy makers are confronted with sharply diminished margin of error.\u201d Annual Gain While these concerns take some shine off the rupee, the currency still retains its \u201creal yield allure\u201d and remains relatively attractive when compared with other sovereigns of similar credit-risk profile, Varathan said. The rupee was at 65.2425 per dollar on Wednesday. It is up 4.1 percent this year, set for its first annual gain since 2010. Varathan in March predicted the potential for the year climb, a view that contrasted a bearish rupee consensus at the time. Now, his year-end forecast is more pessimistic than the median estimate of strategists surveyed by Bloomberg, which shows the currency will recover to 64.50 per dollar by end-2017. \u201cNear-term back-stops suggest that the rupee may face cyclical, and manageable, headwinds rather than a fundamental crisis of confidence,\u201d he said. Rank Top USD\/INR Forecasters - 3Q 2017 FX Forecast Accuracy Rankings 1 Rand Merchant Bank 2 Emirates NBD 3 Mizuho Bank 4 Yes Bank 5 Westpac Banking. Some of the rupee\u2019s other forecasters appear to be more positive on the currency even in the immediate future. Here are their comments: Emirates NBD (Aditya Pugalia, director - financial markets research in Dubai) Expects INR to stay range-bound in 4Q; does see some weakness due to changing tone in monetary policy of developed markets India stands out as a fundamentally strong story among EMs, with political stability, strong macroeconomic position, low inflation, stable currency and still-high growth trajectorySignificant part of growth slippage can be attributed to transient factors like roll-out of the goods and services tax; GDP as evidenced by high-frequency data should start rebounding over the next two quarters Govt has not fallen prey yet to demands of fiscal stimulus and seems committed to maintaining the fiscal prudence it has displayed over the last three years USD\/INR forecasts: 65 for end-2017, 66 for end-March 2018 Yes Bank (Shubhada Rao, Mumbai-based chief economist) Slower growth, widening current-account deficit and higher inflation were already factored into USD\/INR forecasts, by way of an upward trajectoryHowever, do see points of risks such as deterioration in India\u2019s fiscal situation and\/or delayed post-GST economic recovery, which could pose some upside pressure on the pair Despite the depreciation, risk-adjusted carry return for INR is amongst the most attractive amongst EMs USD\/INR forecasts: 65 for end-Dec. and 64.5 for end-March Westpac (Frances Cheung, Singapore-based head of macro strategy) Expects INR outperforming Asian peers; view is primarily based on India\u2019s strong economic growth relative to the region USD\/INR forecasts: 64 at end-2017 and 63 at end-March.