MUMBAI, Aug 26 Reuters An expected U.S. interest rate cut next month is unlikely to help the overvalued Indian rupee, even as its emerging market peers gain, bankers said.

The rupee was nearly flat on Monday after Federal Reserve Chair Jerome Powell on Friday endorsed an imminent start to rate cuts.

The move was in line with the rupee39;s recent underperformance as the currency has failed to gain from the dollar39;s broad slump.

The Indian currency has weakened slightly this month, despite a more than 3 drop in the dollar index.

Meanwhile, peers Brazilian real, Thai baht, Indonesian rupiah and Malaysian ringgit have climbed about 5.

India39;s central bank will likely welcome the underperformance as the rupee39;s real effective exchange rate REER a measure of its competitiveness rose to a near 7year high last month.

The rupee39;s 40currency REER was at 107.3 in July, signaling that the rupee was overvalued by about 7, according to the Reserve Bank of India39;s latest monthly bulletin.

The overvaluation means the Reserve Bank of India will likely prevent a large appreciation in the rupee39;s exchange rate.

Despite broader USD weakness, the Reserve Bank of India has been keeping the currency stable. In our view, this provides an opportunity for the REER to come down, Akshay Kumar, head of global markets at BNP Paribas India, said.

From a policymaker39;s perspective, the higher REER reading would be a risk to India39;s export competitiveness, private lender HDFC…