Intervention in Foreign Exchange Markets: The Approach of the Reserve Bank of India
8 Pages Posted: 6 Oct 2014
Date Written: October 2013
Abstract
The exchange rate of the rupee is determined largely by the market forces of demand and supply. The Reserve Bank of India has intervened occasionally to maintain orderly conditions and curb excessive volatility in the foreign exchange market. Being a current account deficit country, India is dependent on capital flows for financing the current account deficit. Given the dependence on volatile capital flows, there may be a case for augmenting forex reserves when the situation permits without any bias for a particular exchange rate band.
Full publication: Market Volatility and Foreign Exchange Intervention in EMEs: What Has Changed?
Keywords: capital flows, exchange rate, intervention, foreign exchange reserves
JEL Classification: F32, F310
Suggested Citation: Suggested Citation