Depreciating Rupee Against Dollar

Abstract

What could be the reasons for recent depreciation of the Indian rupee? This article tries to find out the probable reasons of the recent depreciation of the rupee and which theory explains this situation best. In October, 2012, one had to sell about `53 to buy 1 US $. After twelve months, he had to sell about `11 more to get 1 US $. During this twelve months' period, Indian ` depreciated sharply by about 21% against the US $; average month-to-month (m-o-m) fall rate was 1.72% and on monthly compounding basis, fall rate was 1.55%.