The central bank should stop piecemeal intervention in the currency market
The rupee has dipped below . 56 to the dollar, despite intervention by the Reserve Bank of India (RBI). It is time the central bank stopped intervening in a piecemeal fashion. Such intervention serves, at best, to smoothen the path of the rupee’s relentless fall; not to stop or reverse it. At worst, it erodes credibility in the central bank’s ability to influence the currency. In any case, it is not the RBI’s goal to manipulate the exchange rate and hold it at any artificial level. True, no one knows what the appropriate exchange rate is. Players in the currency market are making bets, informed or otherwise. The most informed guess would be the RBI’s. It should signal that it would refrain from intervention till the rupee reaches.............
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