Make it a two-way bet

The rupee has been falling for months, losing 17.3 per cent of its value vis-a-vis the dollar since September. Many observers have come to believe that there is little reason to suppose that the rupee will recover before as late as March next year. The Reserve Bank of India (RBI), meanwhile, insists its mandate is merely to minimise volatility in the foreign exchange market, and not to defend the value of the rupee. While sensible in theory, in practice this is clearly beginning to show some flaws. A serious question needs to be raised: does this continuing precipitous decline reflect a sense taking hold in global markets that the rupee, the worst-performing currency in Asia this year, is a safe one-way bet?

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