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Journalism of Courage
MUMBAI, January 17: The Reserve Bank of India8217;s RBI is defending the rupee at a wrong level, the London-based head of emerging markets research at IDEA said on Friday.
8220;Our view is that fundamentally, the RBI has come in defending the wrong level, 40 Rupees to the dollar,8221; John Davitte, head of emerging markets research, IDEA said in a faxed commentary.
8220;The rupee 40.0 to the dollar does not represent fair value on the rupee to us, and the Finance Minister is quite wrong to suggest that it is,8221; it said.IDEA8217;s real effective exchange rate REER estimate point to levels closer to 45.00, Davitte said.
8220;8230;This intervention is doomed to fail as India8217;s balance of payments deteriorates in line with an uncompetitive rupee,quot; Davitte said.
In the near term, the RBI steps will aid the rupee to stabilise around 39.00-40.00 by making moves to short the local currency more expensive, and also by bringing better volumes back into the foreign exchange market, he said.
