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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