The rupee weakened past 81 against the dollar for the first time ever last week. The RBI’s intervention in the forex market to help stem the volatility by selling dollars has meant that our forex reserves have fallen about $94 billion over the course of about 12 months to about $545 billion in mid September. How much lower can we afford to let our reserves go? Is there a ‘correct’ level for the rupee? Where does the interest rate as a policy tool figure in all of this?
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In Focus by The Hindu