Rupee hits 71

The rupee breached the 71 level and closed August at that level, recording the biggest monthly decline in three years. The local currency had weakened to 71.03 in intraday trade. Given that the Indian currency was trading at Rs.68.55 against the greenback on July 31, the drop this month is nearly 3.6%. The last time the rupee declined by over 3% in a month was in May this year.

The rupee came under pressure with emerging market currencies weakening. In Turkey, reports of the central bank deputy governor set to resign led to the lira falling sharply. The Indonesian rupiah fell to a 20-year low after fears that the currency crisis in Argentina and Turkey would spread to other emerging markets. What is adding to the pressure on the rupee is that the Reserve Bank of India has been saving its reserves and not intervening in a big way. According to bankers, the RBI seems to be sending a message that it is not averse to a marginal depreciation.

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