In its latest monetary policy statement on August 1, the Reserve Bank of India (RBI) mentioned “trade tension” four times. It is indicative of the times that emerging markets are going through where trade tensions are rising and financial conditions are not so benign due to rising volatility in crude prices. And now the rupee has touched a historic low of Rs 70.08 a dollar in a sell-off of emerging-market currencies led by the Turkish lira.

The markets seem to have foreseen the situation. When the rupee had touched Rs 69.84 a dollar on August 13, Rushabh Maru, research analyst at Anand Rathi Shares and Stock Brokers, said Rs 70.50-level would be the next short-term resistance and Rs 71.00 will be the next “watch-out-for” level.

Meanwhile, Aditi Nayar, principal economist at rating agency ICRA, opines that broader emerging market currency movement, dollar strength, and the trend in crude oil prices will drive the outlook for the rupee in the immediate term. Nayar also finds solace in the fact that Indian foreign exchange reserves remain substantial despite the decline from the all-time high of April 2018. “The RBI (Reserve Bank of India) is likely to assess the trend in the rupee vis-à-vis the EMs (emerging markets) currency pack,” says Nayar. “If all EM currencies are depreciating, the rupee must weaken to protect export competitiveness.”

According to the RBI data on monthly average exchange rates, the rupee has depreciated 1,372% from Rs 4.76 in May 1966 to Rs 70.08 on Tuesday. Since the historic Union budget of July 1991, the rupee has weakened in excess of 175% from Rs 25.47 a dollar. Here we take a look at how the value of rupee against the dollar has fallen over the years.

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