The US dollar exchange rate against the yuan will move largely in the 6.2 to 6.4 range in the next 12 months, a research note from investment bank UBS AG said on Tuesday.

"We believe that fundamentally, the renminbi is no longer much undervalued," said Wang Tao, an economist with UBS.

China's current account surplus — the broadest measure of the country's international trade — dropped below 3 percent of its GDP in 2011 from the 2007 peak of 10 percent, and is expected to stay below 3 percent in the coming years.

Furthermore, the market does not believe the yuan is undervalued anymore — both the non-deliverable forward, or NDF, market and the onshore forward market have been pricing in a weakening yuan in the past year, according to the research note.

Net capital inflows have also turned into outflows in much of the past year.

"Given the weak export growth, we believe the government has no appetite to let the yuan appreciate steadily and consistently," said Wang.