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RBI Hung Rupee Out to Dry During Emerging Market Selloff

RBI hardly intervened to support the rupee during the Turkey crisis two weeks ago, Bloomberg Economics’ estimate.

RBI Hung Rupee Out to Dry During Emerging Market Selloff
Clothes hang to dry outside the makeshift shelters of EU migrants at a temporary encampment on a forested hillside in Stockholm, Sweden.(Photographer: Casper Hedberg/Bloomberg)
RBI Hung Rupee Out to Dry During Emerging Market Selloff

(Bloomberg) -- The Reserve Bank of India hardly intervened to support the rupee during the Turkey-driven rout in emerging markets in the week ended Aug. 17, according to the Bloomberg Economics’ estimate. This was a departure from the central bank’s recent aggressive defense of the currency, though the RBI’s hands off-approach on the exchange rate is likely to be limited to periods of broad risk-off sentiment in emerging markets. Trying to defend the rupee in such circumstances would be challenging, and probably lead to a sharp depletion of its $400 billion in foreign-currency reserves.

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