Question
What was the effect of RBI’s intervention to reduce
the steep fall in the value of rupee? Read the passage and answer the questions that follow. The rupee is yet again facing renewed pressure, along with major peers, as the dollar continues to strengthen in the wake of the Federal Reserve’s latest jumbo 75 basis points interest rate increase and the U.S. central bank’s unequivocal message that it remains squarely focused on taming inflation. The Indian currency weakened past the 81-mark against the dollar for the first time ever in Friday’s intraday trade, before ending the week at a new record closing low. The rupee’s slide was softened by the Reserve Bank of India’s intervention to smoothen volatility; the cumulative impact of such interventions over the 12 months through September 16 have shrunk the RBI’s war chest of foreign exchange reserves by almost $94 billion to $545.65 billion. The fact that the rupee is not alone in depreciating against the dollar can be of little comfort to Indian companies reliant on imports of raw materials or services for the smooth functioning of their businesses.Solution
In the passage, it is stated that “The rupee’s slide was softened by the Reserve Bank of India’s intervention to smoothen volatility; the cumulative impact of such interventions over the 12 months through September 16 have shrunk the RBI’s war chest of foreign exchange reserves by almost $94 billion to $545.65 billion.”
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