Don’t defend the rupee, RBI

The turmoil in global currency and stock markets has led to large movements in the rupee and it has weakened sharply. Should RBI have intervened in a big way to try to prevent rupee depreciation? Even in normal times, defending a currency is a difficult job. In current times, a central bank of one country trying to bravely fight the tsunami of financial flows with its little kitty of reserves would be a really bad idea. As the rupee hit 50 to a dollar, the best thing RBI could do was to keep away from the foreign exchange market.

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