RBI Spends Billions Defending Rupee Against Strong Dollar, Confusing Traders On Motives and Capability
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RBI has spent billions defending the rupee against the strong US dollar this year, puzzling traders.
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Analysts have theories on why RBI is defending the rupee - to contain imported inflation, curb excessive moves, boost investor confidence.
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RBI governor said the bank intervenes in FX markets but doesn't target a level. Objective is not to fix dollar-rupee rate.
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RBI may not be able to defend the rupee for long as fundamentals like thin short-term debt cover are unfavorable.
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Rupee has withstood dollar strength better than Asian peers in 2022, confounding traders who bet it would weaken.