SINCE JULY LAST year, the Reserve Bank of India's (RBI) efforts to squeeze out volatility from the USDINR market resulted in the formation of a crumbling cliff, and, when push came to shove—as it did with Trump's victory in the US presidential election—the rupee keeled over, falling sharply to yet another all-time low.
Tragically—and as was pointed out by myself and many other analysts—the approach, so obviously flawed, had several other negative impacts: the RBI's foreign currency assets (FCA) fell dramatically (USD 100 billion and counting since October 2024, if we include its forward sales); volatility in the domestic money market increased, making it difficult for banks and corporates to plan their cash flows (which limited growth); and the rupee's real exchange rate climbed (rendering exports less competitive).
This story is from the January 10, 2025 edition of Financial Express Lucknow.
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This story is from the January 10, 2025 edition of Financial Express Lucknow.
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