Rupee on a rollercoaster

The RBI couldn't prevent the rupee from sliding to a record low against the US dollar this week, though it did eventually manage to trigger a sharp rebound with stricter controls on FX speculation including curbs on NDFs and forward contracts. That will probably be enough to enable the MPC to keep interest rates unchanged next week. But a bigger terms of trade shock over the coming months may necessitate more conventional FX intervention, and potentially tighter monetary policy.