The rupee in doldrums

In essence, the rupee’s recent bout of depreciation is very similar to the situation that prevailed in late 2011. At that time, the high current account deficit, together with a drying up of capital inflows as the crisis in Europe threatened to spiral out of control, had led to a fall in the rupee. This time, too, nervousness in Europe about the outcome of the Greek elections combined with uncertainty about the policies that will be pursued by the new French president has led to another spell of risk aversion.

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