The exchange rate has exhibited increased two-way flexibility. In the eight months to June 2005, the RBI scaled back intervention in foreign exchange markets and the rupee appreciated by 4 percent against the dollar (6½ percent in real effective terms). In the second half of 2005,—with the exception of a six-week period following China's July 21 revaluation, when the RBI intervened to stem appreciation pressures—the rupee depreciated, reflecting pressures from the growing current account deficit and renewed U.S. dollar strength.
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International Monetary Fund
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