ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Uneasy Portents

THE sharp and sudden fall in the rupee's exchange rate vis-a-vis the US dollar in the last fortnight has evidently taken the government and the Reserve Bank by surprise The authorities had been taking credit for the stability of the rupee-dollar rate for almost 30 months since March 1993, except briefly in March this year when there was a bunching of demand for foreign exchange and some speculative pressure on the rupee. The rupee-dollar rate has indeed been relatively stable after the dual exchange rate was replaced by a unified rate from March 2,1993, with all foreign exchange transactions being effected at the market rate. After the exchange rate was freed the rupee had begun trading at Rs 32.07 per dollar and then steadily gained strength and got anchored at Rs 31.37 per dollar in July 1993. It remained at that level till the end of October last year, or for a continuous period of 16 months. This was the outcome of active intervention by the RBI which mopped up foreign currencies worth as much as $24.24 billion $13.94 billion in 1993-94 and another $ 10.30 billion in 1994-95 in terms of gross purchases from the market.

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