Question

RBI's Intervention in the foreign exchange market started well in 1990s in the wake of the adoption of the
managed floating exchange rate regime. Although the purpose in general has been to check undesirable
volatility in the exchange rate, RBI states the objectives as follows
(1) To influence the trend movements in the exchange rates because they perceive long term
equilibrium values to be different from actual values
(2) To maintain export competitiveness.
(3)
To manage volatility in order to axe risk in financial market transactions
(4) To protect the currency from speculative attack
The intervention has now turned more significant in view of large inflows on account of foreign
investment - both FDI and FII The quantum of FDI has suddenly soared up from US $7.722 billion from
FY 2005-06 to US $19.531 billion during FY 2006-07. The investment by FII was too large
The net investment was as big as US $3.225 billion during FY 2006-07, although the gross investment
was mich bigger. During the first four months of FY 2007-08, FDI and FIIs net investment were
respectively of the order of US $6.609 billion and US $11.774 billion
It was natural for INR to appreciate in the sequel of huge supply of US dollar in the foreign exchange
market. INR which was once at a low of 46.88 per US dollar during April 2006, appreciated to 41.19
during April 2007 and further to 39.77 during September 2007. Indian imports turned cheaper following
appreciation
​

Answer 1

Answer:

rewrite it ................