The mystery of the falling rupee

Is something strange afoot in the rupee-dollar market, or am I just imagining things? The rupee continues to remain under pressure and apparently there is fairly heavy intervention by the Reserve Bank of India (RBI) to stop it slipping past 54 to the dollar again. Yet, if you ask any trader in a bank treasury, he is likely to tell you that there is hardly any shortage of dollars in the markets. Thus, the momentum of the rupee doesn’t seem to be driven by a large mismatch between the supply and demand for dollars. 

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