Rupee: depreciated tactics - Renu Kohli

.....There is little doubt that the measures the Reserve Bank of India (RBI) has taken to increase the inflow of foreign capital are remedial in nature and not really aimed at fighting a fundamental exchange rate adjustment. The central bank is more managing the pace of currency depreciation than supporting the rupee at this or that level. With foreign exchange reserves down to six months of import cover, short-term debt above 40 per cent of overall external debt and significant foreign currency liabilities due for repayment in the near term, the RBI knows better than anyone that it can only do so much and no more. The RBI also must be conscious of the fact that it did not buy any foreign currency to accrete reserves when the rupee was on the upswing since 2009. But it is now forced to sell to moderate the depreciation, which is unsustainable beyond a point as it will only deplete reserves.......

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