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India’s Defense of Rupee Takes Large Bite From Record Reserves

  • Current account gap may expand by end of this fiscal year
  • Rupee still outperforming many of its Asian peers this year

India’s intervention to protect the rupee is running down currency reserves at a rate that’s poised to eclipse the drawdown during turmoil a decade ago.

While economists and the Reserve Bank of India aren’t ringing any alarm bells just yet, investors are watching closely given the rupee’s slump to an all-time low last month and the risk of a widening in the current account deficit.