Sacrificing Rupee for Stability and Security

The rising dollar in the face of the worst financial crisis US has seen since the Great Depression is not a miracle but a sound and systematic intervention which has kept dollar afloat. Its a simple case of "you scratch my back and i scratch yours". The Fed helped the Asian economies during 1997 and helped strengthen the Euro during 2000. Why? These countries understand that its in mutual interest to keep dollar stable and strong which in turn would enable currencies pegged to it remain stable and also be in the best interest of countries who have built up huge dollar reserves.

With crude eventually rising due to decreased supply by OPEC, its in every one's best interest to keep the dollar strong for the time being. In fact India's Central bank, The Reserve Bank of India has been piling up dollars since 2002 and has purchased $75 billion worth of USD in the last 4 years. It has bought on average of $10 billion a month for the last seven months. With dollar being the standard currency for global exchange and trade settlement combined with crude traded only in dollar, India is betting on being safe and sacrificing the strength of rupee keeping in view the long term interest of the nation. But this range of sacrifice in the near term is between Rs40 on the lower side and Rs 50 on the higher side. Any less of any more, and you will find RBI intervening.