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| Source: Investing.com |
Why wouldn't India's central bank intervene? Here is one possibility. India's current account has been under significant pressure in the past few years. Exports have not kept up with rising domestic demand and increasing labor costs have made it more difficult to compete in global markets.
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| Source: Tradingeconomics.com |
One way to arrest this trend is by allowing the rupee to devalue. India certainly has sufficient foreign reserves to halt the rupee devaluation, but so far it is choosing to let it go.
Bloomberg: - The Reserve Bank of India sold dollars, two traders with knowledge of the matter said, asking not to be named as the information isn’t public. The bank sold “small amounts” to smooth volatility rather than protect a certain level, one of them said. The country’s foreign currency stockpile was $290.7 billion as of June 14, down from an all-time high of $321 billion in 2011, official data show.
